One of the most common questions we hear from founders, CEOs, and shareholders of privately owned businesses is deceptively simple: “What multiple could my business achieve?”

The honest answer is that valuation is never driven by a single factor. Size, growth, margins, management quality, and process execution all matter. But across hundreds of mid-market transactions, one reality is unmistakable: sector selection has a disproportionate impact on valuation outcomes.

Some sectors consistently command premium EBITDA multiples, while others struggle to break through valuation ceilings—even when run exceptionally well. Understanding why this happens is critical for owners planning an exit, considering Private Equity investment, or making strategic decisions years ahead of a transaction.

This article sets out a clear, investor-led perspective on which sectors attract the highest valuations, which lag behind, and - most importantly - why. It also explains what business owners can do to position themselves on the right side of this valuation divide.

How investors really think about valuation

Before looking at individual sectors, it is important to understand how professional investors approach valuation in the private markets.

Unlike public markets, where minority shareholders value earnings and dividends, Private Equity and strategic buyers focus on control, cash flow, risk, and exitability. Valuation multiples are therefore a reflection of confidence—confidence in:

The durability of cash flows
The predictability of earnings
The scalability of the business model
The resilience of demand across cycles
The availability of future buyers

Sectors that score highly across these dimensions consistently attract more capital, more competition, and higher valuations.

The valuation hierarchy: a sector-led view

While every deal is unique, European mid-market data shows a relatively stable valuation hierarchy. At the top sit technology and healthcare. In the middle are business services and infrastructure-adjacent assets. Toward the lower end are capital-intensive, cyclical, or commoditised sectors.

This hierarchy is not about fashion. It is about risk-adjusted returns.

1. Technology & Software – the valuation benchmark

Technology, particularly B2B software and technology-enabled services, continues to command the highest valuation multiples in the private markets.

Why technology attracts premium valuations

Technology businesses benefit from a rare combination of attributes that investors prize:

Recurring revenues, often subscription-based
High gross margins and strong operating leverage
Low capital intensity
Scalability without proportional cost increases
Global addressable markets

These characteristics support both growth and downside protection—allowing investors to underwrite ambitious return targets with confidence.

In addition, technology businesses often benefit from multiple exit routes: secondary buy-outs, trade sales, or even public listings. This optionality directly supports valuation.

Important nuance: not all tech is equal

Valuation premiums concentrate in specific sub-sectors:

Vertical software
B2B SaaS
Mission-critical systems
IT services with embedded IP or automation

Pure project-based IT services, early-stage platforms, or undifferentiated resellers typically trade at much lower multiples.

2. Healthcare & Life Sciences – resilience commands a premium

Healthcare is consistently one of the highest-valued sectors across Europe.

Why investors pay up for healthcare

Healthcare businesses benefit from:

Structural demand growth driven by demographics
Non-discretionary spending
High barriers to entry, including regulation and clinical expertise
Predictable utilisation patterns

From an investor’s perspective, healthcare offers something rare: growth with defensiveness. Earnings tend to be resilient even during economic downturns, supporting leverage and valuation stability.

Sub-sectors that attract particularly strong valuations include:

Outpatient clinics and specialist care
Diagnostics and testing
Healthcare services platforms
Healthtech with proven adoption

The regulatory trade-off

Regulation is a double-edged sword. It raises barriers to entry and protects incumbents—but only for businesses with strong compliance cultures. Weak governance or regulatory risk is punished severely in valuation.

3. Business Services – the mid-market workhorse

Business services sit firmly in the middle-to-upper valuation range and account for a large proportion of Private Equity activity.

Why business services perform well

High-quality business services businesses often share several attractive traits:

Recurring or repeat revenues
Contractual relationships
Fragmented markets, ideal for buy-and-build strategies
Asset-light operating models

Examples include:

Professional services
Outsourcing and compliance
Testing, inspection, and certification
Managed services

Valuations tend to increase meaningfully where services are mission-critical, embedded in client workflows, or difficult to replace.

The key differentiator: defensibility

Investors differentiate sharply between:

Differentiated, specialist service providers
Generic, price-driven service businesses

The former attract premium multiples; the latter struggle to do so regardless of growth.

4. Infrastructure & infrastructure-adjacent assets – stability over growth

Infrastructure and infrastructure-like businesses often trade at attractive multiples, albeit for different reasons than technology or healthcare.

Why investors value infrastructure highly

Infrastructure assets are valued for:

Long-term contracted revenues
Inflation linkage
Low volatility
High predictability

In the private markets, this extends beyond classic infrastructure into:

Environmental services
Utilities-adjacent businesses
Data centres
Essential logistics and networks

Valuations are supported by downside protection rather than explosive growth. As a result, multiples can be high, but returns are often driven more by yield than multiple expansion.

5. Financial & professional services – valuation dispersion matters

Financial and professional services show wide valuation dispersion.

At the top end sit businesses with:

Recurring fee income
Regulatory licences
Sticky client relationships
Scalable platforms

Examples include:

Trust and fiduciary services
Wealth and asset management platforms
Specialist advisory firms

At the lower end are transactional, cyclical, or people-dependent models.

In this sector more than any other, structure, governance, and succession planning materially influence valuation.

6. Industrials & manufacturing – quality matters more than sector

Industrials and manufacturing typically trade at lower average multiples, but this hides significant variation.

Why valuations are often lower

Investors discount:

Capital intensity
Cyclicality
Exposure to input costs
Operational leverage in downturns

However, high-quality industrial businesses can still achieve strong valuations where they demonstrate:

Niche market leadership
Pricing power
Recurring aftermarket revenues
Technology-enabled differentiation

In many cases, industrial businesses that reposition themselves as solutions providers rather than manufacturersmaterially improve valuation.

7. Consumer & retail – the valuation penalty sector

Consumer-facing businesses generally attract the lowest valuation multiples in the private markets.

Why investors are cautious

Key concerns include:

Demand volatility
Brand fragility
Margin pressure
Rapid shifts in consumer behaviour

Even well-run consumer businesses are often viewed as structurally riskier than B2B counterparts. Exceptions exist—particularly premium brands with loyal customer bases—but valuation ceilings are real.

What really drives sector valuation premiums

Across all sectors, the same underlying drivers explain why some command higher multiples than others:

1. Revenue quality

Recurring, contractual, or subscription-based revenues consistently outperform transactional income.

2. Cash flow predictability

Stable EBITDA supports leverage, downside protection, and investor confidence.

3. Scalability

Businesses that grow without proportional cost increases attract premium pricing.

4. Defensibility

Regulation, switching costs, IP, and embedded client relationships all matter.

5. Exit optionality

Sectors with multiple credible buyer groups trade at higher multiples.

Can owners “outperform” their sector?

Yes—but only with discipline.

Exceptional businesses can and do outperform sector averages, sometimes by 30–50% or more. However, these outcomes are rarely accidental. They are driven by:

Strategic positioning
Professionalised governance and reporting
A clear equity story aligned with investor thinking
A competitive, well-managed sale process

This is where experienced advisers make the biggest difference.

The role of preparation and process

One of the most persistent myths in M&A is that valuation is discovered at the end of a process. In reality, it is shaped months—or years—earlier.

Owners who understand how their sector is perceived by investors can:

Invest ahead of an exit
Address valuation discounts proactively
Position the business toward higher-multiple peer groups

At Dyer Baade & Company, we work with founders and shareholders long before a transaction to ensure that sector dynamics, investor expectations, and business reality are aligned. Our focus is not simply on selling companies, but on maximising outcomes.

Final thoughts: sector matters, but strategy decides

Sector selection is one of the strongest predictors of valuation—but it is not destiny.

High valuations flow to sectors where investors see confidence, optionality, and resilience. Within those sectors, the best outcomes go to businesses that are prepared, positioned, and advised correctly.

For owners considering an exit or investment in the next few years, the most valuable question is not “What multiple could I get today?” but:

“What would an investor need to believe for my business to be valued at the top end of my sector?”

Answer that question early enough—and act on it—and valuation becomes a result, not a gamble.

If you would like to understand how your sector is viewed by investors and what drives valuation in your specific situation, we would be happy to arrange a confidential discussion.

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This article reflects Dyer Baade & Company’s experience advising founders, CEOs, and professional investors of privately owned businesses across Europe on Private Equity and alternative ownership strategies.

Which Sectors Attract the Highest Valuations in M&A deals – and Why