Heading the Right Way Slowly

Heading the Right Way Slowly

gfdata nfMiddle-market deal volume and valuations continue to pick up steam in the third quarter of 2013, according to GF Data’s November 2013 report.

The 181 private equity firms that are active contributors to GF Data reported 34 completed transactions in the third quarter, up from 17 in 1Q and 22 in 2Q. (GF Data reports on transactions completed in the $10 million to $250 million Total Enterprise Value (TEV) range at multiples of 3-12x Trailing Twelve Months (TTM) Adjusted EBITDA.)

Valuations averaged 6.6x trailing twelve months (TTM) Adjusted EBITDA in the third quarter, up slightly from 6.5x in 2Q and well above the 5.9x mark recorded in 1Q.

“We continue to see the scarcity of product push valuations upward,” said Andrew Greenberg, GF Data’s CEO. “And the rise is being fairly widely felt across major sectors. Multiples are up in health care services, business services and distribution while aggregate multiples are flat in manufacturing. Subscribers using our searchable data base will find strength in selected niches. For example, while the overall average for the year to date is 5.8x, in computer and electronic products, the average is 7.9x.”

The rise in valuation is even greater for more attractive businesses, noted B. Graeme Frazier, IV, GF Data Principal and Co-Founder. “Selling businesses with above average EBITDA margins and revenue growth traded at an average of 7.0x in the year to date,” said Mr. Frazier. “For other firms the average is 5.7x.”

“The third quarter data reflects a “perfect storm” of high public company values, under-levered balance sheets, massive and rapidly expiring private equity overhang and inexpensive debt capital. The intersection of these factors has created very high demand for what is currently a limited supply of sellers,” said Mike McGill, founder and Managing Director of investment bank MHT MidSpan.

In the November report, GF Data also debuted the more granular debt data the firm began collecting earlier this year. This includes not only reporting on aggregate debt loads, but the data can now be crosscut based on several transaction features. For example, while aggregate total debt in 2013 year-to-date is 3.6x EBITDA, in transactions at or close to maximum available leverage the figure is 4.2x.

GF Data provides reliable external information for use in valuing and assessing M&A transactions to private equity firms, investors, lenders and other users. GF Data collects and publishes proprietary transaction information from private equity groups on a blind and confidential basis. Two hundred and thirteen private equity firms have provided information on deals included in the latest report. Data contributors and paid subscribers receive three products: high-level valuation and leverage data; key deal-term data on indemnification, escrow and basket benchmarks; and continuous access, through GF Data’s secure website, to detailed valuation data organized by NAICS code.

For information on subscribing or on contributing data as a private equity participant, please contact Bob Wegbreit at bw@gfdataresources.com or 610-260-6263.

© 2013 PEPD • Private Equity’s Leading News Magazine • 11-22-13

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