Through the first six months of 2015, middle market data from over 200 financial sponsors outlines current valuations in what can be described as a ripe “seller’s market.” Compared to a year ago, transaction volume in the first 6-months of the year is up modestly. However, this total fell short of predictions cast by a number of analysts on Wall Street; market conditions seemed to suggest that a record number of business owners would pursue a sale due to market multiples and seller leverage. The third quarter of 2015 represented more of the same for private middle market M&A – or less of the same, depending on what you are looking at. Valuations for the third quarter of 2015 averaged 7.1x, the highest quarterly mark in 13 years.
Buyers continue to pay a premium for larger businesses, which is consistent with historical data. In addition to this ‘size premium’, buyers identified additional key value drivers that they look for when evaluating a potential acquisition. These include: (1) institutional ownership prior to sale, as opposed to individual/family owned enterprises, (2) above-average financial characteristics, and (3) management remaining post-close. Each of these factors individually influenced overall valuation of the company. So, what does that mean? According to private deal data collected by GF Data Resources LLC, on average, a company that meets each of these 3 criteria was valued at 8.4x Adj. EBITDA.
Download full PDF Report Here: Market Report 2015