Mid-Market Deals Maintain High Valuations as Deal Pace Slows

Deborah L. Cohen | middlemarketgrowth.org
GF Data Report Calls Activity ‘More of the Same’

Midsize companies commanded higher valuations in the third quarter, though the number of deals was down, according to GF Data Resources, a research firm that tracks the middle market.

Deal values for transactions reported to the firm averaged 7.1 times EBITDA in the quarter, the highest level since the firm began tracking data 13 years ago. The firm tracked 37 deals in the period, down from 51 in the second quarter and 50 in the same quarter last year.

“We’re now a few years into this strong sellers’ market and it’s pretty clear that if there was going to be a kind of gold rush for owners to sell their businesses, it would have happened by now,” GF Data CEO Andrew Greenberg told Middle Market Growth. “I think business owners are a lot less into timing the market than deal professionals are.”

The enterprise value of the transactions—gleaned from confidential reports from private equity firms, mezzanine lenders and other financial sponsors—ranged from $10 million to $250 million in total enterprise value, GF Data said.

Greenberg qualified deal activity in the third quarter as “more of the same,” noting that market drivers identified in the first half of the year were as evident or more so in the latest period. Business owners, he said, appear willing to wait to sell, confident bullish economic conditions will lead to additional improvement in company performance.

He said buyers are paying a premium for larger-size companies, strong financial performance, management continuity and institutional ownership prior to sale.

“The uptick in valuation is being experienced across the major industry categories, excluding technology, with the highest valuations coming from health care services businesses,” Greenberg said.

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