M&A Quarterly Newsletter – March 2024
by Taureau Group
Market Summary
- Valuations on deals completed in 4Q 2023 averaged 7.5x TTM adjusted EBITDA, an increase of 0.2x compared to 3Q and well above the 6.7x average in 2Q.
- The two industries showing the highest EBITDA multiples through 4Q 2023 were technology at 10.2x and health care services at 9.3x. EBITDA multiples for all manufacturing companies averaged 6.5x through 4Q 2023, compared to the 6.7x average in 3Q 2023.
- Deals valued between $10 million and $25 million recorded a more than half-a-turn improvement in 4Q, reaching an average of 6.6x compared to an average of 5.9x in 3Q. Deals valued between $25 million and $50 million reached 7.0x compared to 6.9x in 3Q.
- Add-ons accounted for 49% of transactions at year-end 2023, up slightly from 48% in the first three quarters, and well above the 34% average for 2022.
- Buyout deals recorded an average purchase price of 7.3x for 2023, compared to 7.4x in 2022 and 7.5x in 2021.
- Senior debt pricing continued to surge, reaching an average of 11.3% through 4Q, compared to 10.5% in 3Q.
- The average coupon on subordinated debt dropped in 4Q, falling to 11.9%, compared to 12.0% in 3Q and within less than a percentage point of the average senior coupon.
What’s New at Taureau Group
- December – Taureau Group published its 2023 Volume II Industrial & Contract Manufacturing Industry Report.
- December – Completed the recapitalization of Pro Products, Inc. to AFM Capital Partners.
- January – Completed the sale of Wisconsin Metal Parts, Inc. and Lean Manufacturing Products, Inc. to SOLV Metals, LLC, a division of SOLV Holdings, LLC.
- January – Completed the sale of Mid Valley Industries, LLC, a portfolio company of Gardner Standard, LLC, to Manitowoc Tool & Machining, LLC, a portfolio company of Midwest Growth Partners, LLLP and Summit Equity Group, LLC.
- February – Addy Francois joined Taureau Group as an Analyst. Learn more about Addy here.
- February – Engaged by packaging solutions and manufacturing company for potential sale.
- February – Taureau Group published its 2023 Volume II Medical Devices Industry Report.
- February – Completed the acquisition of Jorgensen Conveyor and Filtration Solutions for Innocence, Inc.
- March – Michael Schroeder is promoted to Managing Director.
- March – Engaged by multi-facilities early childhood education company for potential sale.
- March – Taureau Group proudly sponsored the BizTimes Media 2024 M&A Forum.
- March – Tom Venner joins Taureau Group’s shareholder group.
Despite the low deal volume in 4Q 2023, deal valuations improved at the end of the year, particularly for deals valued between $10 million and $25 million, and the market seems more balanced than 2022 in terms of valuations when looking at both the size and quality premiums.
Active Broad Acquisition Searches
- Acquisition opportunities for a private equity platform company looking for residential exterior repair & restoration companies in Southeast U.S. with revenues greater than $5 million.
- Acquisition opportunities for a holding company looking for established electrical contractor companies in Southeast Wisconsin with revenues between $10 million – $25 million.
- ESOP client looking to make acquisitions of educational services, and CTE products and software companies with revenues between $5 million – $20 million.
- Acquisition opportunities for a private equity platform company looking for diverse metal fabrication companies in the Midwest with revenues between $10 million – $50 million.
- Acquisition opportunities for a private company looking for steel erectors focused on the West/Northwest U.S. market with revenues less than $40 million.
- Acquisition opportunities for a private equity platform company looking for CRO, CMO, and CDMO companies specializing in medical devices with revenues between $5 million – $100 million.
- Acquisition opportunities for a private company looking for metal and plastic low to medium volume manufacturers with revenues between $5 million – $30 million.
- ESOP client looking to make acquisitions of wholesale build products distributors with revenues between $5 million – $50 million.
Featured Insights
- 2023 Volume II Medical Devices Industry Report – Download the report here.
- 2023 Volume II Industrial & Contract Manufacturing Industry Report – Download the report here.
Market Statistics
Total Enterprise Value (TEV)/EBITDA*
| TEV | ’03-18 | ’19 | ’20 | ’21 | ’22 | ’23 | Total |
|---|---|---|---|---|---|---|---|
| 10-25 | 5.8 | 6.1 | 5.9 | 6.1 | 6.5 | 6.0 | 5.9 |
| 25-50 | 6.5 | 7.0 | 6.7 | 7.2 | 7.0 | 7.1 | 6.7 |
| 50-100 | 7.5 | 7.5 | 8.0 | 8.3 | 8.5 | 8.0 | 7.7 |
| 100-250 | 8.1 | 9.2 | 8.7 | 9.3 | 9.1 | 9.8 | 8.5 |
| Total | 6.6 | 7.1 | 7.0 | 7.6 | 7.6 | 7.3 | 6.8 |
TEV/EBITDA—By Industry Category*
| Industry | ’03-18 | ’19 | ’20 | ’21 | ’22 | ’23 | Total |
|---|---|---|---|---|---|---|---|
| Manufacturing | 6.2 | 6.5 | 6.7 | 7.1 | 7.3 | 6.5 | 6.4 |
| Business services | 6.6 | 7.2 | 7.1 | 7.3 | 7.4 | 7.3 | 6.9 |
| Health care services | 7.4 | 8.0 | 7.6 | 8.1 | 8.4 | 9.3 | 7.6 |
| Retail | 6.9 | 9.3 | 6.5 | 8.3 | 8.0 | 6.0 | 7.1 |
| Distribution | 6.5 | 7.0 | 7.5 | 7.2 | 7.2 | 7.1 | 6.8 |
| Media & Telecom | 7.4 | 9.4 | 8.3 | 7.0 | 9.1 | 7.8 | 7.6 |
| Technology | 8.3 | 10.0 | 7.6 | 10.3 | 8.1 | 10.2 | 8.7 |
| Other | 6.3 | 6.5 | 6.2 | 7.3 | 6.7 | 6.9 | 6.4 |
Senior Debt/EBITDA—Splits by Period (platforms only)*
| TEV | 1Q22 | 2Q22 | 3Q22 | 4Q22 | 1Q23 | 2Q23 | 3Q23 | 4Q23 |
|---|---|---|---|---|---|---|---|---|
| 10-25 | 1.8 | 1.8 | 2.1 | 1.7 | 1.9 | 1.7 | 1.1 | 2.2 |
| 25-50 | 2.5 | 2.2 | 2.4 | 2.2 | 2.2 | 1.5 | 2.9 | 1.4 |
| 50-100 | 3.1 | 3.6 | 2.7 | 2.6 | 2.4 | 2.2 | 2.5 | 2.1 |
| 100-250 | 2.9 | 3.6 | 4.0 | 3.0 | 3.0 | 3.3 | 3.8 | 3.3 |
| Total | 2.6 | 2.7 | 2.7 | 2.3 | 2.4 | 2.2 | 2.7 | 2.2 |
*Source: GF Data®. Information included from GF Data may not be used or re-published without permission from GF Data or Taureau Group.