Valuing Timber Mills and Wholesalers in Australia

Australia’s timber industry is a foundational sector—critical to housing, infrastructure and furniture—but how do investors value businesses in this space? Whether you're running a hardwood mill in regional Victoria or wholesaling framing timber to developers in Western Sydney, understanding valuation multiples can help you make smarter decisions about exits, investments, and strategic growth.

EBITDA Multiples for Timber-Related Businesses

While there is no one-size-fits-all valuation figure, the EV/EBITDA multiples for timber businesses generally sit within the range of:

2.8x – 4.0x for importers, exporters, and wholesalers (which would cover many timber distribution operations)

2.0x – 5.5x for hardware and retail timber stores, particularly those with a physical presence

Most timber wholesalers—especially those with a lean cost structure and diversified product range—fall into the 2.8x to 3.5x EBITDA band, where ~68% of SME transactions typically land. Pushing above 4.0x usually requires:

Strong recurring contracts (e.g., B2B supply deals with national builders)

High stock turnover (limiting capital lock-up)

Proprietary or niche timber products

Demonstrated growth (or pipeline visibility)

Conversely, timber mills—especially those with capital-intensive operations—often attract lower multiples unless they show unique advantages like scale, vertical integration, or secured forestry rights. Here, expect multiples in the 2.0x to 3.0x range, unless the mill doubles as a wholesale distribution hub with established sales channels.

What Impacts the Multiple?

Key value drivers for timber-sector businesses include:

Stock Turnover: Low turnover suggests working capital inefficiency. A business turning stock 2–3 times per year may need price adjustments or working capital support in a deal.

Customer Concentration: Businesses reliant on a handful of buyers (e.g., a single developer or hardware chain) will see discounts.

Machinery & Depreciation: For mills, buyers scrutinize maintenance capex needs. High depreciation with no matching reinvestment can hurt the multiple.

Compliance & Sustainability: Buyers now look for FSC/PEFC certification and modern WHS practices. Non-compliance is a red flag.

A Note on Inventory

Timber businesses often carry large amounts of inventory, especially with supply chain volatility. As a rule of thumb:

A business with $2m in stock, earning $1m EBITDA, and priced at 3.5x EBITDA implies a total investment of $5.5m. That’s a 5.5-year breakeven horizon—a factor many buyers will calculate before signing an LOI.

This is why "stock-adjusted multiples" are common—buyers might negotiate a base multiple on "EBITDA pre-stock" then add stock at cost or discount.

Deal Structures in the Sector

Most deals are structured as asset sales with stock-at-cost adjustments, unless the company has substantial IP, real estate, or brand equity that warrants a share sale. In share sales involving debt, whitewash procedures may be triggered—especially if the buyer plans to secure the debt against the business’s assets post-acquisition.

Final Thoughts: Realism Wins Deals

In Australia, 4x EBITDA is a ceiling, not a starting point. If your timber business is clean, consistent, and systemised—with well-documented contracts and low key-person risk—you could aim for the high end of the multiple range. If it’s owner-dependent, lumpy in revenue, or holds slow-moving stock, expect buyer discounting.

But don’t despair. As we say in the deal world:

“Multiples are a guide, not a guarantee—but a good timber business, priced well, with clean books and a motivated seller can absolutely find a buyer.”