Some Holiday Gift Giving Advice for Commercial Printer Sales People -DeWese

EBITDA's Role in Determining What Your Company's Worth

How printing companies are valued is not only misunderstood among owners, but can also be a source of gut-wrenching angst. I have represented selling shareholders in more than 150 transactions over a 24-year period. In the late 1990s, times were good and the majority of printing companies in all segments, save perhaps forms printing, were profitable and had positive EBITDA. EBITDA is defined as Earnings, Before Interest, Taxes, Depreciation and Amortization.

If, for example, your privately held company has earnings of $1.0 million, interest of $.2 million, taxes of $.2 million and depreciation of $.3 million, then its EBITDA equals $1.7 million. If your revenues equal $17 million, then your EBITDA margin is 10 percent. Back in the 1990s, a buyer might have been willing to pay you five times EBITDA. The five times multiple is called an EBITDA multiple and your company Enterprise Value would have been five times $1.7 million, or $8.5 million.

Publicly traded printing companies, like Consolidated Graphics and RR Donnelley, are traded on the New York Stock Exchange, the American Exchange or NASDAQ. These public companies (listed on page 16 in this issue) also have EBITDA multiples, which are now shown in the last column of the chart. Public companies cannot pay a multiple in excess of their multiple or the acquisition will not be accretive to their earnings. As an example, a public company with a multiple of four cannot pay a multiple of five for your company, or the transaction will be dilutive and could reduce the buyer's stock price.

If you still think that a buyer should pay you five times EBITDA for your company, and don't understand what is written above, Google "EBITDA Multiples" for further explanation.

All of my PhD candidates are on holiday vacation. I have been conducting a Doctoral program for graphic arts sales professionals to earn PhDs in print sales and marketing.

I scheduled a 30-day holiday break so my students could party, shop and celebrate with their families. Depending on their religious affiliations, they have trees to decorate, candles to light and carols to sing. Some of them might, I said "might," even try and sell some printing.

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Some Holiday Gift Giving —DeWese