When analyzing the most recent private equity multiples, it shows there has been a reversion to the mean, with the outlier being in the $25-50 million range. It is expected that deals of this size will experience declines in multiples towards the long-term historical mean, consistent with other middle-market transactions. The multiples paid in fourth quarter are based on historical EBITDA and the future earnings of the businesses, but certainly current events were not considered in these multiples.

The most recent GF Data shows us what we expected: multiples contracted compared to last quarter in all deal sizes except deals greater than $100 million. For all deals under $50 million, the TEV/EBITDA is still slightly above the historical multiple average by 0.2x turns. Deals in the $50 to $100 million market are trending above average by 0.5x turns and deals over $100 million are well above their historical average at 2.2x turns higher.

For the first half of 2019, private equity multiples have remained strong and continued to accelerate on most deal sizes up $250 million in tangible entity value. However, multiples in the $50-$100 million market have reverted back to the mean and we are expecting to see this reversion for other deal sizes given the impacts from the US-China trade war and earnings softness.

The highest multiple that is recognized from a divestiture standpoint using these historical metrics at the end of Q1 2019 suggest that a private equity group is likely going to attain a higher selling multiple (8.1x) when compared to buyouts (7.2x), platform investments (7.4x) and add-ons (6.7x) even when taking into consideration companies with above-average financial characteristics (7.8x) and management staying on post transaction (7.3x) purchased by other private equity groups. Detailed analysis should be done, looking at respective deal sizes and industry to understand how it impacts each company.