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Private Company Capital Newsletter
March 2005 The two graphs below tell the whole story……..
As you can see, 2004 was a record year in terms of the average multiple of EBIT (operating income) paid for privately-held, middle-market companies. The average of 7.1x was nearly 1x higher than the previous record set in 2000. In addition to strengthening pricing across the board the overall number of private company transactions in the middle-market increased 26% last year, representing over half of all M&A deal-flow in 2004. Much of the boon in deal-flow and the increase in pricing was the result of buyers having greater access to debt financing, as shown in Exhibit 2. You can see the clear correlation, by year, between the amount of debt advanced by lenders against private company earnings (Ex..2) and the purchase multiples paid (with the help of that debt) for those companies (Ex. 1). About the IMAP Index I.M.A.P. (The International Network of M&A Partners) is an international network of 60 boutique investment banks focused on middle-market M&A, re-capitalizations and valuations. Partner firms communicate daily with each other in consummating transactions around the globe and report all transactions on an annual basis. I.M.A.P. is the only organization of its kind in the world focused on the sell-side of private equity within the middle-market. As such, it is the only organized, proprietary source of middle-market transaction statistics. The IMAP MidMarket EBIT Index is the de facto measure of private equity values on a year-over-year basis. For the full report go to www.breretonhanley.com/research/ Highlighted Survey Results As you will see from the full report, there was dramatic variance in valuations between deal sizes and industries. The lowest average multiple of EBIT (6.2x) paid was for companies with transaction values between $3 million and $5 million, while the highest (9x) was paid for companies trading between $20 million and $50 million, with 8.2x the average paid for companies valued between $50 million and $100 million. The highest average multiple paid for companies within a given industry was for “Proprietary High Technology Manufacturers” at 8.7x, while the lowest average of 5.1x was garnered by “Proprietary Consumer Manufacturers”. The report also tracks the most active industries in terms of transactions closed for 2004 and 2003. However one interprets the data, 2004 and year-to-date 2005 continues to be the most opportune time to sell a privately-held company within the middle-market by all market measures. For the full report go to www.breretonhanley.com/research/ [ Home | Our Firm | Services | Past Transactions | Research and Resources | Contact Us ] Brereton, Hanley and Company, Inc. 1500 East Hamilton Ave, Suite 102 Campbell, California 95008 Phone: (408) 938-9255 Fax: (408) 938-9259 |
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