Restaurant chains are often valued as a multiple of the revenue they generate. Special adjustments are made depending on cases where outlets are new or have reached a steady state.

In 2014, Burger King struck a deal to buy the Canadian doughnut and coffee chain for approximately $12.5 billion, making for what became “one of the biggest fast-food operations in the world.” 

The two companies essentially formed a new, global company — one with operations based in Canada.

Strategically, the transaction enables Tim Hortons and Burger King to continue growing their unique brands and significantly accelerate international expansion and growth.

Using comparable company analysis, we compare other renowned fast-food chains present globally.

We can see that the revenue multiple increases with a higher EBITDA margin. Yum Brands the owner of Pizza Hut, KFC and other popular brands has an EBITDA margin of 43% almost double the margin of Starbucks, and simultaneously the revenue multiple is also double.

Whereas the EBITDA multiple is in a steady range of 15 to 17 times across the peer group.

As Tim Hortons has a lower margin than the competitor McDonald’s, it should have a lower revenue multiple. Assuming a rounded 5-time revenue multiple on chain’s revenue we achieve a value very close to 12.5 bn.

The SEC filing of the transaction further confirms that the multiple applied to the chain’s EBITDA to derive its terminal value ranged from 13x to 16x. 

Assuming the 14-time multiple, we get closer to the value of the deal here too.