News

As we review the quarterly activity of private equity mergers and acquisitions, it’s evident that the landscape is evolving, shaped by the aftershocks of the COVID-19 pandemic and shifting economic dynamics.

Since 2021, we’ve observed a rapid acceleration spurred by the pandemic, but now a noticeable deceleration in growth. Valuation multiples, particularly for deals ranging between $25-$50 million and $100-$250 million, have declined during this period. This trend suggests that the entire market is currently grappling with growth challenges. While transactions in the $50-$100 million range have seen a slight uptick, last quarter’s multiples are down from Q1 2022 when TEV/EBITDA multiples were 8.8x and now 8.2x. This signals a broader market trend toward re-evaluation and adjustment.  As purchase price multiples have contracted, the Total Debt / EBITDA debt multiples continue to revert to their mean and below.

In the latest quarter, deal multiples in transactions below $50 million increased. Deals in the $10-$25 million range experienced a 0.7x increase to 6.6x TEV/EBITDA, while those in the $25-$50 million range rose by 0.1x to 7.0x TEV/EBITDA.

However, there was a multiples compression for deals in the $50-$250 million range. Transactions between $50-$100 million decreased by a full turn from 8.7x to 7.7x TEV/EBITDA, and those between $100-$250 million also declined by a full turn from 11.1x to 10.1x TEV/EBITDA.

Buckle up for another year of financial rollercoaster madness, brought to you by the unpredictable dance of EBITDA multiples and the continuing climb of debt costs. Yes, we blame them entirely for the sarcasm.

Deals Valued between $25-50 million – In Q3 2022, valuation multiples for deals in this range stood at 7.8x EBITDA. However, a notable shift occurred, and these multiples dropped by 15.3% to 6.6x EBITDA…….

In the first quarter of 2023, we observed an increase in valuation multiples across all deal sizes, following a decline in the fourth quarter of 2022.  This trend mirrors what is happening in the stock market.  When analyzing the data on completed transactions, we noticed that only a select portion of the market is experiencing gains (high quality transactions), similar to 7-10 companies driving the stock market gains.