M&A Quarterly Newsletter - September 2021

September 23, 2021

Market Summary

  • TEV/EBITDA in Q2 2021 averaged 7.2x, slightly above 6.8x in the previous quarter. This shows a return to historical aggregate pricing in the 7.0x - 7.2x range that had characterized the market since 2017.
  • The two industries showing the highest EBITDA multiples through Q2 2021 were technology and distribution, at 8.2x and 7.6x, respectively. EBITDA multiples for all manufacturing companies averaged 7.0x, which is above historical averages of 6.2x.
  • On average, larger buyouts continued to receive a premium to EBITDA multiples. The spread in valuation between deals completed in the $50-$250 million TEV range compared to deals in the $10-$50 million TEV range was 2.1x through Q2 2021, which remains in line with historical averages.
  • Recent data is showing an unprecedented gap between companies with above-average financials (TTM revenue growth and EBITDA margins above 10% or one above 12% and the other 8%) and those without; buyouts for businesses with above-average financials averaged 7.8x vs. 5.8x for all others, a premium of 34%, above the already elevated 27% premium in Q4 2020.
  • Platform buyouts averaged higher EBITDA multiples than add-ons through Q2 2021, 7.3x compared to 6.3x, respectively, which is in line with historical averages.
  • The lending market may be returning to pre-COVID form as total debt levels averaged 3.7x in Q2 2021, which is consistent with average debt load over the past two years.

What’s new at Taureau Group

  • June – Completed valuation assessment for a process systems manufacturing company in the food & beverage, consumer products, and liquid processing industries.
  • June – Completed the sale of KDV Label Co., Inc. and its sister company, I-Graphics, LLC, to Mason Wells. 
  • July – Jake Mende joined Taureau Group as an Analyst. 
  • July – Taureau Group proudly sponsored BizTimes 2021 M&A Forum; The M&A Market is White Hot - Are you a Seller or a Buyer? 
  • July – Tyler Carlson and Michael Schroeder discussed key factors driving company value and tax & deal structure, respectively, at the M&A Forum.
  • July – Completed the sale of Novo Group, Inc. to Recruiter.com (NASDAQ: RCRT), an AI-powered hiring platform company.
  • August – Taureau Group is named one of 2021's Best Places to Work by the Milwaukee Business Journal; read more here.
  • September - Completed the sale of a pharmaceutical waste company to a global medical waste management company.

The M&A industry, particularly middle-market transactions, continues to surge thanks to the supply of low- and high-yield debt, an abundance of dry powder, low interest rates and soaring valuations. Industry market intelligence shows that M&A-related leveraged loan issuance stood at a record level in the first half of the year and is expected to continue reaching record highs.

Active Broad Acquisition Searches

  • Strategic add-on opportunities for ESOP client looking for engineering or architectural service firms with revenues between $2 million - $15 million.
  • Private equity client looking to establish new platforms of industrial businesses with revenue up to $75 million and EBITDA up to $8 million.
  • ESOP client looking to establish new platforms in a broad variety of niche manufacturing and business service industries with EBITDA of $2 million or more and total enterprise values greater than $10 million.
  • ESOP client looking to make acquisitions of highly engineered industrial product manufacturing or engineering companies with less than $20 million of revenue.
  • Acquisition or partnership opportunities for buy-side client looking for automobile technology and power access companies with revenues less than $100 million.
  • ESOP client looking to make acquisitions of metal fabricators with manufacturing facilities in Southeast U.S. with revenues between $5 million - $50 million.

Featured Articles

  • M&A Appetite for IT & Tech-enabled Services Remains Voracious. - Read the article here.
  • Taureau Group Named One of Milwaukee's Best Places to Work. - Read the article here.

Market Statistics

Total Enterprise Value (TEV)/EBITDA*

TEV '03-16 '17 '18 '19 '20 YTD'21 Total
10-25 5.6 6.3 5.9 6.1 5.9 5.9 5.7
25-50 6.2 6.6 6.8 6.9 6.8 6.9 6.4
50-100 6.9 8.2 8.8 7.5 8.0 8.1 7.3
100-250 7.7 9.0 8.7 9.3 8.6 8.5 8.2
Total 6.2 7.2 7.2 7.0 7.0 7.0 6.5

TEV/EBITDA—By Industry Category*

Industry '03-16 '17 '18 '19 '20 YTD'21 Total
Manufacturing  6.0 6.8 6.9 6.5 6.7 7.0 6.2
Business services 6.2 7.3 7.1 7.1 7.0 7.0 6.6
Health care services 7.0 8.1 7.8 8.4 7.8 7.1 7.3
Retail 6.4 7.3 7.5 9.3 6.9 7.0 6.8
Distribution 6.3 7.6 6.9 7.0 7.5 7.6 6.6
Media & Telecom 7.0 7.7 7.8 7.0 8.3 4.3 7.2
Technology 7.1 9.9 9.6 10.0 7.7 8.2 7.9
Other 5.9 6.5 7.0 6.5 6.3 6.5 6.1

Senior Debt/EBITDA—Splits by Period*

TEV Q319 Q419 Q120 Q220
Q320 Q420 Q121 Q221
10-25 2.4 3.2 2.9 4.0 2.7 3.0 4.2 3.0
25-50 3.0 2.9 3.0 2.2 2.7 2.9 3.4 2.5
50-100 3.2 3.1 3.4 2.2 2.6 2.9 3.2 2.8
100-250 3.3 3.8 4.9 2.6 3.2 4.0 3.6 3.5
Total 2.9 3.1 3.5 2.7 2.7 3.1 3.6 2.9
*Source: GF Data®. Information included from GF Data may not be used or re-published without permission from GF Data or Taureau Group.


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