Home >> Resources >> Blogs >> Market Insights >> Middle Market Transactions Show Continued Rise in Deal Volume and Value
19 Nov |
|
Third quarter deal volume reaches its highest level since 2008 and valuation multiples climb. A recent report by GF Data indicates that middle market deal volume continued to accelerate in the third quarter of 2010, reflecting steady improvement in the M&A environment. The data, which came from 151 private equity firms regarding transactions valued between $10 million to $250 million, showed that 33 transactions were completed in the third quarter of 2010. This outpaced the number of M&A transactions in the previous seven quarters. Average multiples for transactions in the third quarter also demonstrated a significant increase as overall valuations averaged 6.0x trailing twelve months adjusted EBITDA, compared to valuations in the low-to-mid 5x range for the previous four quarters. "The significant improvement in valuation multiples in the third quarter of 2010 was a very significant positive indication that many business owners have been waiting for," said Douglas Hendrickson, Co-Founder of MidCap Advisors, LLC. "As the economy gradually improves and valuations continue to rise, we expect that more and more business owners will want to begin to explore their options and consider selling." "We've also seen the amount of debt financing increase for lower middle market transactions," said John Poppe, Co-Founder of MidCap Advisors. "Many lenders seem comfortable with total debt of approximately 2.7x EBITDA, with senior debt averaging 2.2x. This is an increase of about half a turn from earlier in the year." The most attractive industries for acquisitions during the third quarter included manufacturing, business services and health care services. All three showed an uptick in valuation multiples, whereas deals in the media and retail sectors remained sluggish. "The overall pace in the market has certainly picked up in the second half of 2010. Deal volume is up, valuation multiples have increased, and financing has loosened up as well, especially for companies doing more than $5M in EBITDA. We are very optimistic for 2011," said Hendrickson. |
