How Brands Are Valued Before an Acquisition

When Mars acquired Kellanova in August 2025 for $35.9 billion, it paid 16.9 times trailing EBITDA. When Roark Capital bought Subway for $9.55 billion, the implied multiple was roughly 13.6 times. When a small distributor in Ohio changes hands for $3 million, it might trade at 2.95 times seller's discretionary earnings.

The spread between those numbers is not random. It reflects how buyers think about brand value, growth potential, and risk. We talked to M&A advisors, reviewed 2026 valuation data from CT Acquisitions and Houlihan Lokey, and traced the methods that buyers actually use when they put a price on a brand.

If you want to understand why one brand sells for 17 times earnings and another sells for 3, this is how the math works.

The Three Valuation Approaches

Every credible brand valuation method falls into one of three approaches: cost, market, or income. The American Society of Appraisers and the AICPA both codify these three families in their professional standards. ISO 10668 explicitly requires the valuer to consider all three approaches, document why one is preferred over the others, and where possible triangulate among them.

In practice, an income approach is the primary number. A market approach is a sanity check against comparable brand deals. A cost approach establishes a floor. When the three methods converge, confidence is high. When they diverge, the valuer owes an explanation.

The income approach, specifically the relief-from-royalty method, is used in roughly 80 percent of formal brand valuations published worldwide according to Brand Finance methodology guidance. The idea is simple: what would you save by owning the brand instead of licensing it from someone else? That hypothetical royalty savings, discounted to present value, is the brand's worth.

Method 1: EBITDA Multiples (The Workhorse)

Enterprise Value = Normalized EBITDA x Sector Multiple. This is the formula that drives most mid-market brand acquisitions.

Consumer goods and FMCG brands trade at 6 to 12 times EBITDA in 2026. Food and beverage brands trade at 5 to 10 times. Beauty and personal care trade at 9 to 14 times. Pet products trade at 10 to 15 times. The range within each category depends on growth rate, margin profile, distribution breadth, and brand defensibility.

The most common valuation mistake is comparing an SDE (seller's discretionary earnings) multiple to an EBITDA multiple as if they were interchangeable. They are not. SDE includes the owner's salary, personal expenses run through the business, and one-time costs. EBITDA strips those out. A 3x SDE multiple on a $2 million SDE figure might equate to a 5x EBITDA multiple on a $1.2 million adjusted EBITDA figure. Same business. Same price. Different denominator. Different multiple.

For lower-middle-market businesses ($1 to 25 million EBITDA), the typical range across all industries is 4 to 7 times EBITDA, with a midpoint around 5.5x. SaaS and healthcare services trade at the high end. Construction, e-commerce, and food and beverage trade at the low end.

Method 2: Discounted Cash Flow (DCF)

DCF projects future free cash flows and discounts them to present value using a weighted average cost of capital plus a risk premium. It is more common in larger transactions and for high-growth businesses where near-term EBITDA understates future earning power.

For a consumer brand growing 30 percent year over year with expanding margins, an EBITDA multiple based on trailing earnings will understate value. The buyer is not paying for what the brand earned last year. They are paying for what it will earn over the next decade. DCF captures that forward-looking expectation.

For most small and mid-market sellers, DCF serves as a cross-check. The buyer runs a DCF alongside the EBITDA multiple analysis. If the DCF comes in well below the multiple-based valuation, it signals that the growth assumptions embedded in the multiple are aggressive. If the DCF comes in higher, the buyer may increase the offer.

Method 3: Precedent Transactions and Trading Comparables

Trading multiples provide current market benchmarks. Precedent transactions provide evidence of what acquirers actually paid for control. Buyers generally use market methods to establish guardrails and use DCF to test the operating case.

When Coca-Cola acquired Costa Coffee for $5.1 billion in 2019, analysts triangulated against publicly disclosed coffee chain multiples to estimate how much of the price was paying for the brand versus the store estate. The market approach gave a credible cross-check on the income approach used internally by Coca-Cola's auditors.

In 2026, CT Acquisitions maintains an M&A multiples database tracking 42 mega-cap, 30 middle-market, and 25 lower-middle-market transactions from 2024 to 2026. The median public-buyer EV/EBITDA across all acquisitions is 9.8x. Consumer and retail trades at a median of 8.5x, with branded CPG food at 13x standard and 17x premium. The Mars/Kellanova deal at 16.9x sits at the top of the branded CPG range.

The Brand Equity Premium: Why Brand Matters

A branded CPG company can trade at roughly double the multiple of a private-label manufacturer with identical margins. The reason is pricing power. A branded consumer company retains gross margin under cost inflation because consumers will pay more for a name they recognize. A private-label competitor cannot.

For most branded companies, brand equity is the largest single component of business value. Two CPG companies with identical revenue, margins, and cash flow can be worth twice as much or half as much as each other, and the difference is brand.

CT Acquisitions' analysis of ASC 805 purchase price allocations shows brand-allocated values ranging from 30 to 50 percent of total intangibles plus goodwill. A brand value that exceeds 60 percent of total enterprise value is a red flag. One that comes in below 15 percent in a category where comparable deals show 30 to 50 percent brand allocations is a missed opportunity to defend the price.

For a deeper dive on what makes a brand worth billions, see our post on what is brand equity and why acquirers pay billions.

2026 Valuation Multiples by Category

The 2026 multiples tell a clear story: premium brands with strong distribution command the highest multiples, while commoditized categories trade lower.

Sources: Intrepid Investment Bankers Q1 2026, Whipstitch Capital 2026, Houlihan Lokey Consumer M&A Insights 2026 Q1, Harris Williams, Consumer Growth Partners.

A fast-growing, high-margin brand gets a revenue conversation. A steady, profitable brand gets an EBITDA conversation. The distinction matters because revenue multiples and EBITDA multiples produce wildly different valuations for the same business.

The Quality of Earnings: Why the Denominator Matters

A buyer may accept an 8.0x valuation framework but reduce normalized EBITDA after Quality of Earnings work. The QoE process reconciles reported earnings to adjusted, then normalized EBITDA by examining owner compensation, one-time expenses, non-recurring revenue, and related-party transactions.

If a founder pays themselves $500,000 in a business where a market-rate replacement would cost $200,000, the buyer adjusts EBITDA down by $300,000. At an 8x multiple, that is $2.4 million in lost enterprise value. Founders are often surprised by how much the QoE adjustment moves the final number.

Buyers also look at working capital. If the business requires 20 percent of revenue tied up in inventory and receivables, the buyer needs to fund that gap at close. A business with $10 million in revenue and $2 million in working capital needs means the buyer writes a check for $2 million on day one, on top of the purchase price.

Who Pays What: Strategic vs Financial vs Holdco

The camp that buys you sets your multiple more than your brand does.

Strategic acquirers (Mars, PepsiCo, Unilever) pay 1 to 2 turns above financial buyers. They price on revenue because they can plug the brand into existing distribution and immediately increase sales. They are buying growth, not cash flow.

Private equity and growth investors underwrite cash flow and a return. They anchor on EBITDA because their model depends on leveraged returns over a 5 to 7 year hold. They pay for predictability, not upside.

Brand-management PE firms (Authentic Brands Group, Centric Brands) buy the name and the licensing engine. They price licensing income. The operating business may be secondary. The brand itself is the asset.

When Poppi sold to PepsiCo for $1.65 billion, PepsiCo was a strategic buyer. They could put Poppi on every grocery shelf in America within months. A financial buyer without that distribution network would have valued the brand lower because they could not unlock the same growth trajectory.

The Earnout: Bridging the Valuation Gap

The earnout structure bridges valuation gaps when buyer and seller disagree on future performance. The seller gets a base payment at close plus additional payments if the brand hits revenue or EBITDA targets over the next 1 to 3 years.

Earnouts are common when founder dependency is high. If the buyer is uncertain whether the brand can grow without the founder, 40 to 60 percent of the deal may be structured as an earnout. The risk for the seller: the buyer changes strategy post-close, the targets become unreachable, and the earnout never pays out.

Earnouts are less common in strategic acquisitions because the strategic buyer is confident they can grow the brand. They are more common in PE acquisitions where the buyer's return model depends on specific growth assumptions.

For more on deal structures, see our post on how brand acquisitions actually work.

FAQ

How is a brand valued before acquisition? Buyers use three approaches. The income approach (relief-from-royalty or DCF) produces the primary number. The market approach (comparable transactions) provides a sanity check. The cost approach (replacement cost to recreate the brand) establishes a floor. In practice, EBITDA multiples drive most mid-market valuations, with DCF used for high-growth brands and precedent transactions used as guardrails.

What is the difference between SDE and EBITDA multiples? SDE (seller's discretionary earnings) includes the owner's salary, personal expenses, and one-time costs. EBITDA strips those out to show the business's true operating earnings. A 3x SDE multiple and a 5x EBITDA multiple can produce the same valuation for the same business. Comparing the two without adjusting is the most common valuation mistake.

How much does brand equity add to valuation? According to ASC 805 purchase price allocation data, brand-allocated values range from 30 to 50 percent of total intangibles plus goodwill in consumer products. A branded CPG company can trade at roughly double the multiple of a private-label manufacturer with identical margins. The brand is often the largest single component of business value.

What is an earnout? An earnout is a deal structure where the seller receives a portion of the purchase price at close and additional payments if the brand hits performance targets over a set period. Earnouts bridge valuation gaps when buyer and seller disagree on future growth. They are common when founder dependency is high and less common in strategic acquisitions.

Explore Related Brands

• Poppi -- Sold to PepsiCo for $1.65 billion in 2025; a strategic acquisition priced on growth potential
• Olaplex -- Beauty brand whose valuation reflects the premium multiples in the beauty category
• Corona -- Part of the AB InBev portfolio; brand equity valuation in action at conglomerate scale

Browse all brand ownership profiles

Also read: Why Founders Sell Their Brands to Bigger Companies -- the motivations behind the valuations we just covered.

Sources

1. CT Acquisitions: Brand Valuation Methods and Examples (2026) -- https://ctacquisitions.com/brand-valuation-methods-and-examples/ 2. CT Acquisitions: M&A Multiples Database 2024-2026 -- https://ctacquisitions.com/guides/ma-multiples-database-edgar-2024-2026/ 3. CT Acquisitions: Consumer Products M&A Advisor 2026 Guide -- https://ctacquisitions.com/ma-advisor-for-consumer-products/ 4. Houlihan Lokey: Consumer M&A Insights 2026 Q1 5. Intrepid Investment Bankers: Q1 2026 Multiples Report 6. Whipstitch Capital: 2026 Market Overview

All brand ownership data verified through WhoBrands.com research methodology. Last updated: August 2026.