If your firm has net profit of $X, the multiple paid for your business might be 5 times those earnings. The first thing is that the value of just your original operations moves from 5 times earnings to 6 times earnings. That second things is that the value of the purchased operations moves from 5 times earnings to 6 times earnings. The company that bought their business made suspension parts for race cars. And, the customers who purchased the other firm’s suspension parts became customers who also purchased their brake rotors.

Source: Forbes February 16, 2018 18:45 UTC