How to value a services company with 80% recurring revenue?

Alex ThompsonSEARCHER· 2 days ago

I'm looking at a B2B services company in France with €1.2M EBITDA and about 80% recurring revenue from multi-year contracts. The seller is asking 6x EBITDA. For those who have done similar deals — is this fair? Should the high recurring revenue warrant a premium? I've seen comparable transactions in the 4-6x range but those had lower recurring revenue percentages. Any thoughts on how to frame this in negotiations?

Comments (2)

Sophie BernardSEARCHER· Yesterday

6x for 80% recurring seems fair, maybe even a slight discount. I closed a similar deal at 6.5x with 75% recurring. The key is the quality of the contracts — are they truly recurring or just 'expected' renewals? Check the actual churn rate over 3+ years.

Anna LindqvistSEARCHER· Yesterday

As an investor, I'd support 5.5-6.5x for that profile. The question is: what's the client concentration? If the top 5 clients represent >40% of revenue, that's a risk that should bring the multiple down.