Distressed Multiple
Corporate Credit Analysis glossary · Distressed Debt & Restructuring
Definition
The EBITDA multiple used to value a company in a default scenario; typically 20-40% below healthy-company multiples reflecting distressed-asset discount and operational disruption.
Distressed Multiple in plain English
To estimate what a company is worth, analysts often multiply its yearly operating profit (EBITDA — roughly, core earnings before interest, taxes, and accounting wear-and-tear) by a "multiple" — a number reflecting how much buyers will pay per dollar of profit. A "distressed multiple" is the smaller multiple you use when the company is failing, usually 20-40% below what a healthy company would fetch. It's the fire-sale discount: buyers pay less because a troubled business is riskier, its operations are in chaos, and everyone knows the seller is desperate — the same reason a rushed weekend move-out sale gets you far less for your furniture than a patient one.
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