Overall middle-market valuations are trending higher in the year, while deal flow remained steady in the third quarter, according to GF Data, which tracks transaction data from private equity firms.
GF Data, which collects information confidentially, said on Monday that 30 middle-market transactions were reported to have closed by 206 PE firms and other deal sponsors in November. The firm’s middle-market screens include total enterprise value of $10-250 million and TEV/Adjusted EBITDA 3-15X. Total deals reported for the first nine months were 148, down from 169 in the first nine months of 2015.
Overall deal valuations rose to 7.0X on average, up from 6.7X in 2014 and 2015.
“High valuations combined with middling volume tends to support the general impression that the deals getting done in the current environment preponderantly involve better businesses,” said Andrew T. Greenberg, GF Data’s CEO, in a statement. “But our data also shows the extent to which strong valuations are being applied to some sellers with good but not overpowering financial characteristics.”
Philadelphia-based GF Data said total debt/EBITDA settled in at 4.0X adjusted EBITDA in the first nine months of 2016.