M&A Quarterly Newsletter – September 2023
by Taureau Group
Market Summary
- Valuations on deals completed in 2Q 2023 averaged 6.4x TTM adjusted EBITDA, a drop of 1.3x compared to 1Q 2023 valuations.
- The three industries showing the highest EBITDA multiples through 2Q 2023 were health care services at 8.7x and technology and business services at 7.8x, respectively. EBITDA multiples for all manufacturing companies averaged 6.4x through 2Q 2023, compared to the 7.3x average for 2022.
- The spread in valuation between deals completed in the $10-$100M TEV range and those completed at $100-$500M in the first half of the year was 3.2x, up from the 2.4x recorded for 2022, and well above the historic average of 2.7x.
- Add-ons accounted for 49% of transactions completed in the first half of 2023, well above the 23% of transactions completed in 1Q 2023, as well as the 34% average for 2022. The average purchase price for add-ons was about a turn less than platform investments at 6.5x versus 7.4x, respectively.
- The average purchase price of transactions valued between $100M and $250M was down by 1.5x of EBITDA at 8.5x, compared to 10.0x in 1Q 2023.
- The second quarter continued to see significant upward pressure on senior debt pricing, with average senior debt reaching 9.5% in 2Q 2023 – surging 50 basis points over the prior quarter.
- A strikingly low deal count was reported in 2Q 2023 – if annualized it would mark the lowest deal volume tracked in more than five years.
What’s New at Taureau Group
- June – Completed the sale of Managed Packaging Systems, Inc., a portfolio company of Kinsale Capital Partners, LLC, to NASSCO, Inc.
- June – Completed the sale of Formrite Companies, Inc. to G3 Industries, Inc.
- June – Completed the recapitalization of Mixer Systems, Inc. to an affiliate of Bel Air Growth Partners.
- July – Taureau Group is named one of Milwaukee’s Best Places to Work by the Milwaukee Business Journal for the third consecutive year.
- July – Taureau Group is named a Best and Brightest Company to Work For in Milwaukee by the National Association for Business Resources (NABR).
- August – Completed the sale of the subsidiaries of Material Handling Holdings, LLC, a portfolio company of Borgman Capital, LLC, to Ballymore Company, Inc., a portfolio company of Graycliff Partners LP.
- August – Hayden Wage, one of our talented Analysts, was Taureau Group’s Featured Team Member. Learn more about Hayden here.
- August – Taureau Group published its 2023 Volume I Medical Device Industry Report.
- August – Members of our team attended Milwaukee Business Journal’s awards luncheon celebrating being named one of Milwaukee’s Best Places to Work.
- September – Taureau Group published its 2023 Volume II IT Services Industry Report.
Following a first quarter that saw highs and lows (purchase-price multiples and deal volume, respectively), deal volume declined in the second quarter marked by high interest rates and post-pandemic challenges. Average purchase price multiples also dropped markedly across all deal sizes – one symptom of the challenges facing mid-market M&A.
Active Broad Acquisition Searches
- ESOP client looking to make acquisitions of highly engineered industrial equipment manufacturers with revenues between $10 million – $30 million.
- Acquisition opportunities for buy-side client looking for residential garage door services companies with revenues greater than $1 million.
- Acquisition opportunities for buy-side client looking for residential exterior repair & restoration companies in Southeast U.S. with revenues greater than $5 million.
- Acquisition opportunities for buy-side client looking for established electrical contractor companies in Southeast Wisconsin with revenues between $10 million – $25 million.
- ESOP client looking to make acquisitions of educational services, and CTE products and software companies with revenues between $5 million – $20 million.
Featured Insights
- 2023 Volume I Medical Device Industry Report – Download the industry report here.
- 2023 Volume II IT Services Industry Report – Download the industry report here.
Market Statistics
Total Enterprise Value (TEV)/EBITDA*
| TEV | ’03-18 | ’19 | ’20 | ’21 | ’22 | YTD’23 | Total |
|---|---|---|---|---|---|---|---|
| 10-25 | 5.8 | 6.1 | 5.9 | 6.1 | 6.5 | 5.7 | 5.9 |
| 25-50 | 6.5 | 7.0 | 6.7 | 7.2 | 7.1 | 7.1 | 6.7 |
| 50-100 | 7.5 | 7.5 | 8.0 | 8.3 | 8.5 | 7.7 | 7.7 |
| 100-250 | 8.1 | 9.2 | 8.7 | 9.3 | 9.1 | 9.6 | 8.5 |
| Total | 6.6 | 7.1 | 7.0 | 7.6 | 7.6 | 7.2 | 6.8 |
TEV/EBITDA—By Industry Category*
| Industry | ’03-18 | ’19 | ’20 | ’21 | ’22 | YTD’23 | Total |
|---|---|---|---|---|---|---|---|
| Manufacturing | 6.2 | 6.5 | 6.7 | 7.1 | 7.3 | 6.4 | 6.4 |
| Business services | 6.6 | 7.2 | 7.1 | 7.3 | 7.5 | 7.8 | 6.9 |
| Health care services | 7.4 | 8.0 | 7.6 | 8.1 | 8.4 | 8.7 | 7.6 |
| Retail | 6.9 | 9.3 | 6.5 | 8.3 | 8.0 | 5.7 | 7.1 |
| Distribution | 6.5 | 7.0 | 7.5 | 7.2 | 7.2 | 6.5 | 6.8 |
| Media & Telecom | 7.4 | 9.4 | 8.3 | 6.3 | 9.1 | NA | 7.6 |
| Technology | 8.3 | 10.0 | 7.6 | 10.3 | 8.1 | 7.8 | 8.5 |
| Other | 6.3 | 6.5 | 6.2 | 7.3 | 6.7 | 7.0 | 6.4 |
Senior Debt/EBITDA—Splits by Period (platforms only)*
| TEV | Q321 | Q421 | Q122 | Q222 | Q322 | Q422 | Q123 | Q223 |
|---|---|---|---|---|---|---|---|---|
| 10-25 | 2.0 | 2.0 | 1.8 | 1.8 | 2.1 | 1.7 | 1.9 | 1.9 |
| 25-50 | 2.2 | 2.3 | 2.5 | 2.2 | 2.4 | 2.3 | 2.2 | 1.5 |
| 50-100 | 3.1 | 2.9 | 3.1 | 3.6 | 2.7 | 2.6 | 2.3 | 2.2 |
| 100-250 | 3.7 | 3.5 | 2.9 | 3.6 | 4.0 | 3.0 | 3.1 | 3.3 |
| Total | 2.6 | 2.6 | 2.6 | 2.7 | 2.7 | 2.3 | 2.3 | 2.3 |
*Source: GF Data®. Information included from GF Data may not be used or re-published without permission from GF Data or Taureau Group.
View the PDF version of M&A Quarterly.