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Alternative Market Briefing

Midmarket private-equity valuations regain ground in Q3

Friday, November 13, 2020

Laxman Pai, Opalesque Asia:

Valuations of privately-held midmarket companies rebounded as the global economy reopened, said a study.

According to the Lincoln Middle Market Index tracks more than 2,200 private companies worldwide with a median of $30 million in earnings before interest, tax, depreciation, and amortization, during the third quarter, average enterprise valuations for these companies rose to a record 10.4-times their trailing 12-month Ebitda from a multiple of 9.5-times in the second quarter and 9.1-times.

Analysis reveals that most companies' earnings are rebounding with financial performance recovering since the initial shockwaves of the global pandemic were felt.

Businesses that managed expectations with conservative budgets are now revising upward, the average 2020E pre-COVID to post-COVID EBITDA budget decline of 23.4% in Q2, improved to an average decline of 13.1% in Q3.

Deals getting done during the pandemic, which tended to be for low-COVID-impacted businesses, have closed at healthy multiples.

Further, the average enterprise valuation multiple across all of Lincoln's valuations exceeded pre-pandemic levels at 10.4x LTM EBITDA, a record high level. EBITDA multiples increased approximately 10% from the prior quarter, the largest single-quarter increase since Lincoln began tracking the statistic over six years ago.

"When COVID-19 initially struck the market, portfolio companies' management teams produced budgets tha......................

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