The slowdown in M&A activity has been neither as deep nor as prolonged as general industry reports would suggest. After a quiet 1Q16, completed deal volume and TEV/EBITDA multiples increased in 2Q16, from 46 to 58 and 6.6x to 6.8x respectively.
Quarter-to-quarter shifts in valuation over the past two and a half years have not been material. In addition, the “size” premium— the spread between valuations on $10-50M and $50-250M TEV transactions—has been remarkably steady. The spread of 2.2x (an average of 5.8x on the smaller deals and 8.1x on the larger ones) in the first six months of 2016 is exactly in line with the spread in 2014-15. While the market has been relatively stable in equity values, there has been more movement over time in debt levels. Total debt to EBITDA averaged in the “mid-threes” for several years before rising to 3.9x.
Download Market Report Here: Market Report Fall 2016.