An analysis of valuation multiples by sector in the Spanish middle-market: where the opportunities lie for buyers and why some sectors command premiums or discounts.
When evaluating an investment opportunity, one of our first analyses is contextualising the target company’s valuation within its sector’s multiples. Not because sector multiples determine price — each company has its own characteristics — but because they provide an indispensable reference framework.
These multiples are based on our direct experience as buyers — deals we have participated in — for companies with EBITDA between 1 and 10 million euros, reflecting the first half of 2024.
Technology and software (7-12x EBITDA): Highest multiples in the middle-market, driven by revenue recurrence, attractive margins, and growth prospects. Companies with 80%+ recurring revenue and 20%+ growth at the top end.
Professional services and consulting (5-8x): Broad sector where multiples depend on client portfolio recurrence and key-person dependence.
Hospitality and leisure (6-9x): Reflect both operational profitability and underlying real estate value. Premium locations with owned assets at the top.
Industrial manufacturing (5-7x): Reasonable multiples penalised by lower growth perception and capital intensity, with specialised niche manufacturers potentially exceeding the range.
Logistics and transport (4-7x): Fragmentation, labour intensity, and competitive pressure keep multiples relatively low, but consolidated platforms with stable contracts and geographic coverage can reach the top end.
Commerce and distribution (4-6x): Tight margins and disintermediation risks, with exceptions for dominant specialised distributors.
Construction and real estate (4-6x): Inherent cyclicality contains multiples.
Circular technology and environment (6-9x): Rising sector combining solid business fundamentals with circular economy regulatory tailwinds.
Where we see opportunities: undervalued sectors (low multiples do not mean unattractive — a specialised distributor with 15% margins and recurring contracts at 5x may be far superior to a mediocre tech company at 10x), sector convergence (traditional businesses with significant technology components benefit from gradual revaluation), and operational transformation (companies with below-average sector margins for correctable reasons represent valuation arbitrage opportunities).
Warning: multiples are a useful but dangerous tool if used mechanically. Buying a company simply because it trades below sector average, without understanding the discount reason, is a recipe for disaster. At Blue Mountain, multiples tell us where to look. What we find when we look determines whether we invest.
The intersection of traditional business and technology represents one of the most compelling investment opportunities in the Spanish middle-market. While the narrative around technology investment is dominated by venture capital and startups, the reality is that the greatest value creation potential lies in applying technology to established businesses with proven economics.
The typical middle-market company in Spain has been operating for two or three decades. It has a loyal client base, experienced employees, and established market positions. What it often lacks is the technological infrastructure to compete effectively in the coming decade. This gap between established business fundamentals and technology capability is precisely where we see the opportunity.
Our approach is pragmatic rather than ideological. We do not pursue technology for its own sake. Every technology investment must demonstrate a clear return — reduced costs, improved margins, better decision-making, or enhanced competitive positioning. The projects that generate the most value are typically not the most technologically sophisticated but the most operationally relevant: replacing manual processes with automated ones, providing managers with real-time data instead of month-old reports, or enabling pricing decisions based on market analytics rather than intuition.
Implementing technology in traditional businesses requires patience and cultural sensitivity. The resistance to change is real — employees who have done their jobs successfully for years are understandably sceptical of systems that promise to do it differently. The key is involving people in the process, demonstrating quick wins that build confidence, and being honest about what technology can and cannot do.
Data quality remains the single biggest barrier. Companies that have operated with rudimentary information systems for decades cannot implement sophisticated analytics overnight. The preparatory work of cleaning, structuring, and standardising data is unglamorous but essential. We have learned to allocate adequate time and resources to this phase, even when it means delaying the implementation of more visible solutions.
The talent challenge is equally real. Finding professionals who understand both technology and business — who can translate between the language of algorithms and the language of the warehouse floor — is extraordinarily difficult. Building this capability internally, through targeted training and strategic hires, is a long-term investment that pays extraordinary dividends.
By Blue Mountain Capital
By Blue Mountain Capital
By Blue Mountain Capital
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