M&A Quarterly - December 2017

December 15, 2017|Ann Hanna, Corey Vanderpoel

Market Summary

  • Q3 2017 averaged 7.5x TTM Adjusted EBITDA, which was a record high over the last 15 years of data collected by GF Data®.
  • The two highest EBITDA multiple industries for YTD 2017 were technology and health care services at 9.0x and 8.0x, respectively. EBITDA multiples for all manufacturing companies averaged 6.8x, which is 0.7x above historical averages.
  • On average, larger buyouts command a higher EBITDA multiple compared to smaller buyouts. The spread on size premiums for larger-sized deals between $50 million and $250 million compared to deals between $10 million to $50 million was 1.8x for YTD 2017 and slightly below the average historical level of 1.9x.
  • Platform buyouts had a larger average EBITDA multiple than add-ons for YTD 2017, 7.2x to 6.5x, respectively.
  • Buyers continued to reward business with premiums for above-average financials (TTM revenue growth and EBITDA margins above 10%, or one above 12% and the other 8%) for YTD 2017. These companies averaged 7.5x versus 6.5x for all others, which is a premium of 17% and is in line with 2016.
  • Senior debt/EBITDA multiples across all industries continued to rise over the last four quarters and in Q3 2017 were 3.8x.

What’s New

  • August – Completed valuations of a manufacturer and supplier of infrastructure products company and an engineering and manufacturer of consumer goods packaging company
  • September – Taureau Group officially announced its name change from Schenck M&A Solutions
  • September – Taureau Group continued to grow as Brock Childers joined the team as an analyst
  • October – Hosted the Taureau Group M&A Forum at Lambeau Field
  • October – Completed the sale of a digital marketing company to The Anstadt Company
  • October – Completed the valuation of a value-add distribution company
  • November – Completed the sale of a medical billing company to edgeMED
  • November – Completed the valuation of a custom manufactured products and electrical wire company and a custom metal fabrication company

Valuations in Q3 2017 reached record highs coupled with debt levels at unprecedented highs. The third quarter also saw an increase in valuation on smaller transactions, $10 million to $25 million, which may indicate favorable market conditions for smaller businesses.

Market Statistics

Total Enterprise Value (TEV)/EBITDA*

TEV '03-12 '13 '14 '15 '16 YTD '17 Total
10-25 5.6 5.9 5.7 5.8 5.9 6.3 5.7
25-50 6.2 6.8 6.6 6.6 6.5 6.5 6.3
50-100 6.8 6.8 8.4 7.8 7.3 7.9 7.1
100-250 7.3 7.5 7.8 9.0 9.0 8.9 7.9
Total 6.2 6.5 6.7 6.7 6.8 7.1 6.4

TEV/EBITDA—By Industry Category*

Industry '03-12 '13 '14 '15 '16 YTD '17 Total
Manufacturing 5.9 5.9 6.3 6.6 6.1 6.8 6.1
Business services 6.2 6.5 6.5 6.3 7.3 7.2 6.4
Health care services 7.0 7.5 7.8 7.8 7.6 8.0 7.2
Retail 6.5 7.4 8.5 5.5 7.1 6.6 6.7
Distribution 6.1 6.8 7.1 6.7 7.4 6.9 6.4
Media & telecom 7.8 5.5 NA 6.4 6.7 7.5 7.4
Technology 6.6 10.0 9.1 8.0 7.4 9.0 7.6
Other 6.0 6.0 6.9 5.6 7.3 6.6 6.1

Senior Debt/EBITDA—Splits by Period*

TEV Q415 Q116 Q216 Q316 Q416 Q117 Q217 Q317
10-25 2.3 2.6 2.7 2.7 2.7 3.3 2.7 4.7
25-50 3.0 2.7 3.1 2.9 2.3 2.8 3.2 2.7
50-100 2.8 2.8 4.0 2.8 2.9 3.0 4.6 3.0
100-250 2.7 3.4 3.5 4.7 3.5 3.7 3.8 4.2
Total 2.7 2.8 3.3 3.2 2.8 3.1 3.6 3.8

*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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