A report by GF Data indicates completed deal volume in the middle market continued to accelerate in quarter three 2010, reflecting steady improvement in the M&A environment.
The data, supplied by 151 private equity firms on transactions valued between USD10m and USD250m, includes 33 transactions completed in the third quarter of 2010, outpacing the previous seven quarters in the number of deals completed.
Deal volume for 3Q edged upwards from 30 deals in 2Q to 33 completed transactions for the quarter. This represents continued movement toward the peak volume of about 50 deals per quarter through 2006 and the first half of 2007.
Average pricing for transactions in 3Q, meanwhile, demonstrated a pronounced increase as overall valuations averaged 6.0x trailing 12 months adjusted Ebitda, compared to valuations in the low-to-mid 5x range for the previous four quarters.
“The third quarter of 2010 was, by all measures, the cool drink of water that a parched middle market had been waiting for,” says Andrew T. Greenberg, chief executive and co-founder of GF Data Resources. “We expect that deal volume will continue to expand heading into 2011, although we would stop well short of saying the market has strengthened enough to be impervious to backsliding.”
Among major business categories, manufacturing, business services and healthcare services all contributed to the overall uptick in valuation multiples, whereas deal making in the media and retail sectors remained sluggish.
