How Electronics Manufacturers Are Valued
Electronics is a category where I see the widest gap between what owners think their business is worth and what the market actually pays. The reason is almost always the same: customer concentration. A typical EMS or component shop has its top three customers at 60%+ of revenue, often 70-80%, and buyers price that risk aggressively. The same $5M EBITDA business can trade at 4x or at 8x depending entirely on whether revenue is spread across 5 customers or 50.
Multiples by Size Bracket
Sub-$5M EV businesses in our database trade at roughly platform-tier earnings multiples on a published-benchmark basis, but recent EBITDA datapoints in this bracket are too thin to be reliable, most sub-$5M deals get valued on revenue (median ~0.9x).
$5M-$25M EV businesses cluster around platform-tier earnings multiples in our recent data. This is heavily skewed by specialty and aerospace/defense names, however. Pure consumer electronics contract manufacturers in this bracket typically transact at 4-6x.
$25M-$100M EV businesses sit around an earnings multiple in recent transactions. At this scale, buyers are willing to pay for engineering capability, vertical integration (PCB design, fab, assembly, test under one roof), and certifications.
$100M+ EV businesses reach platform-tier earnings multiples, comparable to the larger public EMS names. Jabil (JBL), Flex (FLEX), and Sanmina (SANM) themselves trade at platform-tier earnings multiples, which means the premium private mid-market is paying happens because of specialty positioning, not generic EMS scale.
Customer Concentration Is the Deal Killer
Almost every electronics deal I've worked has come down to a customer concentration negotiation. Buyers see a top customer above 30% and immediately model the impact of losing them. Above 50%, you're effectively selling a single-customer business with a few additions, and the multiple compresses accordingly, platform-tier earnings multiples is realistic in that scenario regardless of what your peers are getting.
The diligence question isn't just "who are your top customers," it's "how long are the relationships, what's the contractual structure, are you sole-source, do you have NPI involvement, and what's the switching cost." A 10-year sole-source aerospace relationship under a long-term agreement is materially different from a 30%-share commercial customer that re-bids annually.
Aerospace and Defense Electronics Premium
The single biggest spread in electronics valuations comes from end-market. Aerospace and defense electronics, particularly anything with AS9100 certification, ITAR registration, or trusted-foundry qualification, trade at platform-tier earnings multiples premium to commercial-grade equivalents. A $4M EBITDA defense electronics business will routinely clear platform-tier earnings multiples, while the same shop doing commercial work might get 6-7x.
Why the premium? Defense work has long program lifecycles (15-30 years), pricing power, extreme switching costs once qualified onto a platform, and a meaningful regulatory moat. Buyers, both strategics like L3Harris, Heico, and TransDigm and PE platforms focused on the space, pay up because the cash flows are durable and the qualifications are irreplaceable.
What Decreases Electronics Value
Consumer electronics commoditization is the most aggressive discount. Businesses making generic consumer-grade boards or assemblies compete directly with offshore manufacturing on cost, and multiples reflect that, typically platform-tier earnings multiples with limited buyer interest beyond opportunistic strategics.
Component obsolescence risk matters. Buyers ask about the bill of materials exposure to single-source semiconductors and life-cycle issues. A business built around a soon-to-be-EOL chip family carries embedded re-engineering cost the buyer will price into the deal.
Working capital intensity drags multiples down. Electronics manufacturers often carry 90+ days of inventory plus another 60+ days of receivables. Buyers calculate invested capital and adjust pricing if the working capital cycle is materially worse than industry norms.