Small business valuations lag as large companies command higher prices

The gap between the valuations of small and large mid-sized businesses in the Netherlands has widened by more than 20 percent in the past six months, according to new data on the Dutch mergers and acquisitions market.

In the second half of 2024, businesses with an annual gross profit of 200,000 euros were sold for an average of 3.7 times their annual earnings, according to the Overname Barometer, published by acquisition platforms Brookz and Dealsuite. Meanwhile, companies generating 5 million euros in gross profit commanded a multiple of six times their earnings.

Buyers reportedly perceive smaller businesses as riskier investments, leading to lower prices, according to Peter Rikhof of Brookz. “Larger companies, starting from 1 million euros in gross profit, are mainly acquired by investment firms and strategic buyers,” he said. “These investors still have a lot of capital available, and that money needs to be put to work.”

Investment fund shareholders and participants expect returns, which adds pressure to deploy capital, Rikhof explained. “This investment pressure means buyers are willing to pay a strong price for acquisitions,” he said. “Doing nothing is ultimately not an option.”