Consistent and growing EBITDA along with the size premium are again driving valuation multiples in private equity transactions. Private equity transactions greater than $100 million were valued under 8.0x EBITDA for three consecutive quarters, finally rebounding in Q2-2021 to the multiple range that was transacted prior to the onset of the Covid pandemic. Valuation multiples on a whole have re-aligned to where they are expected to be with size premiums falling back in line with historical premiums.

In private equity transactions under $250 million, EBITDA enterprise valuation multiples increased from 6.7x to 7.0x EBITDA, an increase of 4.5% from last quarter. As the current EBITDA multiples are compared to historics, multiples have rebounded in the $25-$100 million deal range to near two-year averages, as deals from $100-$250 million are lagging pre-pandemic valuations. When comparing EBITDA multiples to the entire dataset, multiples of transactions in the $25-$100 million range are well above the long-term multiples.

In private equity transactions under $250 million, EBITDA enterprise valuation multiples fell to 6.7x from 7.4x EBITDA (-9.5%) last quarter. Total Debt to EBITDA multiples moved up to 3.7x (12%) compared to the previous quarter at 3.3x EBITDA, why and how this happened is worth discussing. Even though debt multiples increased quarter over quarter, senior debt multiples decreased slightly in the quarter by 0.1x while subordinated and mezzanine debt doubled from 0.5x to 1.0x EBITDA (GF Data).

In transactions under $250 million, EBITDA valuation multiples remain unchanged at 7.4x EBITDA, as the average Total Debt to EBITDA ratio decreased from 3.9x to 3.3x in the quarter. With valuation multiples not changing, private equity buyers increased their equity participation to complete deals from 3.5x to 4.1x EBITDA, resulting in equity investment increasing over 56% of the transaction value (GF Data).

In the first two months of Q1, 2020, deal activity was comparable to the previous quarter with TEV/EBITDA multiples maintaining values above the long-term historical average bolstered by higher than average Debt to EBITDA multiples. In March, when the COVID-19 pandemic began to impact the North American Market, all deal activity came to a screeching halt. Deals that were near being closed mayhave been completed, most other deals have hit the pause button waiting for more certainty.