Pitchbook PE Deal Multiples Show Deal Multiples for Small Deals Falling

November 14, 2013 09:47 by Clayton Reeves in Capital Markets, Financing, M&A, Private Equity  //  Tags: , , , , , ,   //   Comments (0)

As reported by Pitchbook, PE transaction multiples were reasonably steady in Q3 2013. However, deal size showed significant changes. For example, median enterprise value (EV) for small deals (EBITDA<$25 million) fell from 5.0x in Q2 to 2.5x in Q3. On the flip side, EV/EBITDA multiples rose to 10.7x for transactions of $250 million or more, while revenue multiples fell to 1.7x, the lowest in over two years.

So, what does this mean for the market? It means PE firms (and the market in general) continue to pay for profitability over pure sales. Market participants definitely want revenue growth, but they also want healthy margins and solid business models. Since companies with both are rare, PE firms continue to pay a premium on larger transactions. There is generally still no rush towards companies that show revenues, but lack profits, unless the growth story is compelling (i.e., Twitter). 

Key statistics from 3Q 2013 explored in this report include:

  • Median EBITDA multiple:6.81x
  • Median debt percentage: 50%
  • Average time to close a deal: 13 weeks

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