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Bet ter Data. Bet ter Decisions.PitchBook
MEDIAN EBI T DA MULT IPL E F OR 3Q 20 14PAGE 4»
AV ER AGE T IME T O CL OSEPAGE 7»
4 Q 2014
GLOBAL PE DEAL MULTIPLES
& TRENDS REPORTMEDIAN DEB T AND EQUI T Y L E V EL SPAGE 6»
in partnership with
CONTENTSIntroduction
Investment Multiples
Revenue Change
Debt & Equity Levels
Fees & Closing Times
3
4
5
6
7
IntroductionThis ninth edition of our Global PE Deal Multiples & Trends
Report synthesizes survey results and PitchBook data to produce a look at several key PE deal-making metrics. We understand how sensitive deal terms and multiples are to the PE industry. As such, the details of this report will remain completely confidential, will not be incorporated into the PitchBook Platform, and will be used exclusively for aggregated purposes in PitchBook’s reports.
Covering global transactions made in 3Q 2014, our latest survey reveals further progression of previously observed trends, as well as some interesting new data points. General partners are still targeting growing companies, although they have slowed their pursuit of the fastest-growing businesses; the number of respondents who anticipated high growth rates exceeding 10% over the next 12 months declined somewhat.
Another section of the report details a trend previously remarked upon in prior reports - the continued decline of non-senior debt usage. Despite a slight rise this past quarter, overall non-
senior debt remains less popular than senior debt, illustrating the comparative ease of obtaining cheap credit in the current market. Equity rose slightly in usage over senior debt.
Finally, the gradual decrease in the percentage of deals incorporating transaction and monitoring fees observed in past editions of this report reversed in 3Q, though that may be a quirk in the data. However, that increase may be skewed somewhat by different deal-making environments worldwide; we explore the shift further on page 7. Supporting the notion that GPs are paring back on additional charges, transaction fees as a percentage of deal size fell to the lowest level we have observed yet in this report series, while monitoring fees’ percentage stabilized around 4% in what appears to be a historical median, based on our past editions.
If you are interested in participating in future editions of the survey, please contact us at [email protected].
CREDITS & CONTACT
PitchBook Data, Inc.JOHN GABBERT Founder, CEO
ADLEY BOWDEN Senior Director, Analysis
Content, Data & EditingALEX LYKKEN Editor
ANDY WHITE Lead Data Analyst
DANIEL COOK Senior Data Analyst
GARRETT BLACK Senior Financial Writer
BRIAN LEE Analyst
Contact PitchBookwww.pitchbook.com
RESEARCH [email protected]
SALES [email protected]
COPYRIGHT © 2014 by PitchBook Data, Inc. All rights reserved. No part of this publication may be reproduced in any form or by any means—graphic, electronic, or mechanical, including photocopying, recording, taping, and information storage and retrieval systems—without the express written permission of PitchBook Data, Inc. Contents are based on information from sources believed to be reliable, but accuracy and completeness cannot be guaranteed. Nothing herein should be construed as any past, current or future recommendation to buy or sell any security or an offer to sell, or a solicitation of an offer to buy any security. This material does not purport to contain all of the information that a prospective investor may wish to consider and is not to be relied upon as such or used in substitution for the exercise of independent judgment.
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3 PITCHBOOK 4Q 2014 GLOBAL
PE DEAL MULTIPLES & TRENDS
Investment Multiples
Median EV/EBITDA Multiples by Enterprise Value
Median EV Revenue Multiple by Enterprise Value
EV/EBITDA Multiple Breakdown
EV Revenue Multiple Breakdown
EV/EBITDA multiples across all transaction sizes aligned with historical values in 3Q 2014. A slight
uptick in the $250 million+ category pushed the median EBITDA up a notch to 6.9x, slightly above the statistic observed in 2Q, yet more in line with the first quarter of 2014. Looking at 2014 as a whole, the number of transactions with multiples of 5x or higher steadily grew from 1Q to 3Q, approaching the levels observed toward the end of 2012 and 2013.
Source: PitchBook
Source: PitchBook
Source: PitchBook
Source: PitchBook
Revenue multiples overall flatlined around 1.3x. As multiples within the $250 million+ bucket continued to fall, transactions between $25 million and $50 million saw a slight, counterbalancing rise. From quarter to quarter, revenue multiples across all deals have fluctuated considerably; yet the steady, year-on-year increase in the percentage of transactions at 1x or greater reflects the slow rise of valuations overall across the industry.
Investment Multiples Definition
Investment multiples are calculated by dividing the enterprise value of the portfolio company by either the TTM EBITDA or the TTM revenue at the time of the transaction.
0x
2x
4x
6x
8x
10x
12x
14x
16x
1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q
2012 2013 2014
All $0-$25M $25M-$250M $250M+
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q
2012 2013 2014<0x 0x-2.5x 2.5x-5x 5x-7.5x >7.5x
4 PITCHBOOK 4Q 2014 GLOBAL
PE DEAL MULTIPLES & TRENDS
0.0x
0.5x
1.0x
1.5x
2.0x
2.5x
3.0x
3.5x
1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q
2012 2013 2014
All $0-$25M $25M-$250M $250M+
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q
2012 2013 20140x-0.5x 0.5x-1x 1x-1.5x 1.5x-2x >2x
Revenue Change
Growing companies still account for a majority of targets, but perhaps due to those rising valuations,
firms are increasingly pursuing companies with TTM revenue growth of less than 10% or unchanged. Over the past several quarters—withstanding the first quarter of 2014—the number of targeted companies with revenue growth exceeding 10% has steadily fallen. Yet, the number of companies that recorded at least none or
some TTM revenue growth prior to deals has rarely been this high. 96% of respondents predicted growth, similar to the percentage in our previous Deal Terms & Multiples report. The number of those anticipating NTM growth rates of greater than 10% stood at half of all respondents, one of the lowest tallies since the start of 2013. That statistic still represents a jump from the two low points of 3Q and 4Q 2012 and last quarter, however.
Revenue Change 12 Months Prior to DealAnticipated Revenue Change 12 Months Following Deal
Source: PitchBookSource: PitchBook
EV/Revenue Multiple by TTM Revenue Change (2013 - 3Q 2014)
EV/Revenue Multiple by Anticipated NTM Revenue Change (2013 - 3Q 2014)
Source: PitchBookSource: PitchBook
The above charts show the average and median EV/revenue multiples based on the company’s revenue change over the 12 months prior to acquisition and the investor’s expectation for the company’s revenue change in the 12 months following acquisition.
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q
2012 2013 2014
Increased > 10%
Increased < 10%
Unchanged
Decreased < 10%
Decreased > 10%
5 PITCHBOOK 4Q 2014 GLOBAL
PE DEAL MULTIPLES & TRENDS
0.7x0.9x
1.4x
1.0x
1.2x
2.2x
0.0x
0.5x
1.0x
1.5x
2.0x
2.5x
3.0x
Decreased Flat Increased
Median Average
1.0x 1.0x
1.2x
0.9x
1.2x
2.3x
0.0x
0.5x
1.0x
1.5x
2.0x
2.5x
Decrease Flat IncreaseMedian Average
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q
2012 2013 2014
Increased > 10%
Increased < 10%
Unchanged
Decreased < 10%
Decreased > 10%
Debt & Equity Levels
The median debt level seen in 3Q is the third-lowest historically, possibly indicating a trend of
debt usage in transaction financing inclining toward the upper 50s, despite the occasional flirtation with the low 60s seen in a couple recent quarters. Equity edged out senior debt slightly, reflecting the regular ebb and flow between the two observed historically. As a share of financing, non-senior debt grew somewhat compared to last quarter’s total,
which was the lowest we’ve recorded since 2Q 2012. However, with its popularity still considerably lower than senior debt’s, it appears dealmakers are taking full advantage of the lenient lending climate still predominant in today’s credit market. Investors appear to be particularly taking advantage of debt in the $250 million+ enterprise value range, at a 60% median debt level.
Median Debt Levels Median Debt Levels by Enterprise Value (1Q ’12 - 3Q ’14)
Source: PitchBookSource: PitchBook
Average Debt-to-Equity Breakdown
Note: PitchBook receives varying levels of detail regarding the debt used in deals. Some of the charts on this page utilize a subset of our data that contains additional details. In addition, some charts are displaying median debt levels while others show average debt levels. This explains any discrepancies that may be noticed between the charts
Source: PitchBook
0% 20% 40% 60% 80% 100%
1Q
2Q
3Q
4Q
1Q
2Q
3Q
4Q
1Q
2Q
3Q
20
1220
1320
14
Equity Senior Debt Non-Senior Debt
60%59%
53%
59% 58% 59%
57%
63%
54%
60%
56%
45%
50%
55%
60%
65%
1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q
2012 2013 2014
58% 58%
55%
60%
45%
50%
55%
60%
65%
All $0-$25M $25M-$250M $250M+
6 PITCHBOOK 4Q 2014 GLOBAL
PE DEAL MULTIPLES & TRENDS
Fees & Closing TimesOne trend referenced in our prior Deal Terms & Multiples report was the decline in the percentage
of transactions charging transaction and/or monitoring fees. Up until this most recent quarter, the data showed a gradual decline. However, delving into respondents’ data revealed that across Europe and the rest of the world both transaction and monitoring fees appear to be the norm, while in North America, an appreciable number indicated that neither were charged. Notably, among those in North America who indicated neither for both, nearly all referenced transactions of $25 million or less.
Regardless of their recurrence in a majority of transactions in 3Q worldwide, transaction fees as a percentage of deal size decreased to the lowest point recorded since the onset of this report series. Monitoring fees did not decline quite as strikingly, yet they fell toward a historical median, based on our past report data, of around 4% of deal size. LPs may be negotiating GPs away from hefty fees, yet GPs still seem happy to spend plenty of time making deals. Although not as lofty as last quarter’s, the share of deals that took more than 20 weeks to close in 3Q was still considerable.
Median Monitoring Fee as a % of EBITDAMedian Transaction Fee as a % of Deal Size
Source: PitchBook
Source: PitchBook
Percent of Transactions with Deal Fees Transactions (count) by Weeks to Close
Source: PitchBook
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q
2012 2013 2014
>20 wks
15-20 wks
10-14 wks
5-9 wks
<5 wks
3.4%
2.0%
3.0%
2.0%
2.8%
2.0%
3.0%
2.0% 2.0%
2.3%
1.5%
0%
1%
2%
3%
4%
1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q
2012 2013 2014
3.5%
4.0%
3.0%
5.0% 5.0% 5.0%
3.3%3.5%
4.2%4.5%
4.0%
0%
1%
2%
3%
4%
5%
6%
1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q
2012 2013 2014
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q
2012 2013 2014
Transaction Fees Monitoring Fees
Source: PitchBook
7 PITCHBOOK 4Q 2014 GLOBAL
PE DEAL MULTIPLES & TRENDS