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PE sponsors paid record prices in 2017, says Murray Devine report

While US private equity deal volume levelled off last year, falling to levels not seen since 2013, valuation for private equity deals advanced considerably, according to the 2018 Private Equity Valuations Report from Murray Devine.

The research; ‘Acclimatising to the Thinning Air’, which examines trends in financial sponsor-led transactions and highlights how private equity investors are adjusting to record deal multiples, reveals a median multiple of 12.9x EBITDA, easily surpassing 2016 levels and also exceeding the previous high of 10x EBITDA set in 2006.
 
“The divergence in which deal volume retracts as valuations ascend typically reflects a flight to quality that can occur during the later stages of a market cycle,” says report author Daniel DiDomenico III, Senior Managing Director at Murray Devine. “Other factors are also at play, and the data is also beginning to reflect how the industry is evolving, from the growth in add-on acquisitions to a migration toward sectors and companies that will likely benefit from long-term ‘megatrends.’”
 
The report includes data on the median valuations paid by US private equity firms last year, as well as M&A multiples broken down by deal size and by certain sectors.
 
“The ability of sponsors to stay active and transact in such an environment speaks to both the creativity of the asset class and capabilities of sponsors today to create value after the investment,” says Dennis Murray, President and Co-Founder of Murray Devine. “While we think it’s unlikely that valuations ascend much higher in 2018, the ability to deliver returns in this environment underscores the level of sophistication that characterises private equity at this moment.”

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