Scaling Smarter: The Power of Multiple Arbitrage

Ever feel like organic growth just isn’t cutting it? Multiple arbitrage might be the strategy that takes your business to the next level. Whether you’re looking to grow, acquire, or invest, this approach creates value by leveraging one simple concept: bigger is better when it comes to valuations.

What’s Multiple Arbitrage?

It’s a growth strategy that plays on valuation differences. Here’s how it works:

1. Acquire Small Businesses - Buy smaller companies at lower earnings multiples (think 4x EBITDA or lower).
2. Combine & Optimize - Integrate them into a single, more profitable entity with better operations and scalability.
3. Reap the Rewards - The larger business commands higher valuation multiples (say, 6x EBITDA+). Why? Buyers value stability, size, and reduced risk. The bigger the company, the bigger the multiple.

Why It Works for Smart Business Owners and Investors

• Boost Valuations: Larger companies get higher multiples—it’s that simple and there’s tons of valuation data to support it.?
• Drive Efficiency: Combine resources and systems for smoother operations to improve margin and generate cross-sell and up-sell opportunities.
• Build Exit Value: A scaled, optimized business attracts premium offers from private equity and strategic buyers.

The Impact in Action

Imagine buying five businesses, each at 4x EBITDA. After consolidation, the newly scaled entity commands a 7x multiple. That’s massive value unlocked—not through growth alone, but by thinking bigger.

If each of those businesses was doing $1mm in EBITDA, you're laying out $20mm ($1mm EBITDA x?4 = $4mm per company, times?5 companies = $20mm) to acquire a business now worth $35mm( $5mm*7x = $35mm). Almost doubling the value of the business just from multiple arbitrage.

Why Now?

Whether you’re a business owner plateauing at 7 figures or an acquisition entrepreneur looking for the next deal, this strategy lets you scale smarter—not harder.

Want to learn how to apply this to your business or portfolio? Let’s talk.

-Matt?