The latest quarterly survey of company sales, valued between $10 million and $250 million, at 130 U.S. private-quity firms, shows prices are falling for most mid-market companies, says GF Data Resources of West Conshohocken.
Among just 13 recorded deals - the third straight quarter at roughly the same low level, less than half last year's sales - the typical ratio of sale price-to-earnings (before interest, tax, depreciation, amortization) was just 5.1x, the lowest since GF began keeping track six years ago.
Owners of businesses with roughly average or below-average financial characteristics "are accepting greater discounts in multiples," as "many business owners are revising their price expectations in order to sell their businesses," said G F co-owner Andy Greenberg in this statement. Specialized companies with growing markets and improving margins are still getting good prices, and buyout firms are certainly looking for deals, though Greenberg tells me he also predicts a wave of consolidation among private-equity firms.
"If this were a movie it would be 'He's just not that into you,'" Greenberg added. Sellers are "reconciling themselves to a valuation environment that is not likely to rebound" to 2007 levels.
"Sounds like doom and gloom. But the closing of the gap between seller expectations and valuations could signal a return to more deal activity" next year, added B. Graeme Frazier IV, Greenberg's partner in GF, in the statement.
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