News

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.

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.