M&A Quarterly - June 2016

June 16, 2016|Ann Hanna, Corey Vanderpoel

Market summary

  • 2016 started with EBITDA multiples averaging 6.7x for private equity transactions with enterprise values less than $250 million, unchanged from 2014 and 2015. However, deal volume in Q1 was down 36% compared to Q1 2015.
  • The spread on size premiums for larger sized deals between $50 million and $250 million compared to deals between $10 million and 50 million decreased from 2.0x in 2015 to 1.1x in Q1 2016. Although a decrease in Q1 2016, buyers typically pay a premium for companies above $50 million in transaction value.
  • Buyers continue 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%) in Q1 2016. Buyouts averaged 7.1x vs. 5.9x for all others, a 20% premium and well above the historical spread of 7%.
  • Add-on acquisition valuations were 0.9x higher (7.3x) than platforms (6.4x) in Q1 2016.
  • Transaction debt levels during Q1 2016 increased to 4.1x from 3.9x in Q4, largely due to buyers using debt capacity of larger portfolio companies to pay for add-on acquisitions and an increase in sub debt.
  • Senior debt/EBITDA multiples for Q1 2016 dropped across all deal sizes, averaging 2.7x overall compared to 3.0x in 2015 and a historical average of 2.5x.

What’s new at Schenck M&A Solutions

  • June: Commenced marketing on behalf of a leading industrial coating company
  • May: Advised on valuation of machine shop in the metal fabrication industry
  • May: Completed sale of Penworthy Company to a private investor group
  • May: Completed sale of Times Printing Co. Inc. to Kappa Printing Group II, an affiliated company of Kappa Media.
  • May: Presented “The Market’s View of Your Business...Believe It or Not” at BizExpo.
  • May: Promoted Michael Schroeder to Associate
  • April: Advised on valuation of wood product manufacturer
  • April: Co-sponsored and presented “How Private Equity Views Your Business” at the BizTimes M&A Forum
  • April: Completed transaction advising OwnersEdge on the acquisition of BAYCOM, Inc. and subsidiaries
  • April: Representing consumer branded products company for sale

Read the full issue of Schenck M&A Quarterly→ 

Securities offered through Burch & Company, Inc., member FINRA / SiPC. Burch & Company and Schenck M&A Solutions are not affiliated entities. Ann Hanna and Corey Vanderpoel of Schenck M&A Solutions are registered investment banking representatives with Burch & Company.