…[the] gap between public chemical company valuations and private chemical company valuations is significant.  Many owners of privately held companies will mistakenly look at values of public chemical companies to gauge the value of their own business.

A Look at EBITDA Multiples of Publicly Held Chemical Companies

EBITDA multiples are mostly used and discussed in the context of specific transactions.  Another useful way of looking at EBITDA multiples however is in the context of the valuation that the stock market places on those chemical companies that are publicly held.  Since the stock market is putting a value on a company every day, it is often helpful to see what the EBITDA multiples are for chemical companies that are publicly traded. 

The basic formula for converting a company’s stock price into an EBITDA multiple is this:

stock price x number of shares outstanding = Market Cap

Market Cap – cash + debt, preferred stock and minority interests = Enterprise Value

Enterprise Value ÷ EBITDA = EBITDA multiple.

We looked at the EBITDA multiples of over 100 publicly held companies that are in the chemical industry.  As always, there are significant caveats (see page 2) but nevertheless, some interesting generalized observations can be made.