M&A Quarterly Newsletter – June 2023
by Taureau Group
Market Summary
- Valuations on deals completed in 1Q 2023 averaged 8.0x TTM adjusted EBITDA, rebounding from the 6.9x average in 4Q 2022 and in line with the 8.2x average set in the third quarter.
- The two industries showing the highest EBITDA multiples through 1Q 2023 were health care services and business services at 9.5x and 9.0x, respectively. EBITDA multiples for all manufacturing companies averaged 7.0x through 1Q 2023, compared to the 7.3x average for 2022.
- The spread in valuation between deals completed in the $10-$100M TEV range and those completed at $100-$500M in 1Q 2023 was 3.4x, up from the 2.4x difference for 2022.
- Add-ons accounted for 23% of transactions completed in 1Q 2023, well below the 34% average for 2022. The average purchase price for add-ons in 1Q 2023 was 7.5x versus 8.0x for platforms.
- The average purchase price of transactions valued between $100M and $250M was up nearly a full turn of EBITDA at 10.0x, compared to an average 9.1x for 2022.
- The first quarter saw significant upward pressure on debt pricing, with average senior debt reaching 8.1% – nearly 1.5 percentage points higher than the prior quarter.
- Average equity contribution on platform deals reached 59.7%, while average senior debt contribution dropped to 29.6% (compared to 56% and 32.4% in 2022).
What’s New at Taureau Group
- April – Taureau Group proudly sponsored BizTimes Media 2023 M&A Forum – Navigating the Road Ahead, presenting to over 300 attendees.
- April – Engaged by residential and commercial mechanical contractor for consideration of potential sale.
- April – Completed the sale of American Prosthetic Components, LLC, a portfolio company of Beverly Capital, to ARCH Medical Solutions Corp.
- April – Taureau Group participated as a Gold Sponsor at Manufacturing Matters.
- May – Michael Schroeder, Director & Owner, welcomed a healthy baby girl to the family.
- May – Tom Venner, Vice President, welcomed a healthy baby boy to the family.
- June – Taureau Group published its 2023 Volume I Packaging & Printing Industry Report.
- June – Ann Hanna is recognized by BizTimes Media as a Notable Nonprofit Board Leader.
- June – Completed the sale of Managed Packaging Systems, Inc., a portfolio company of Kinsale Capital Partners, LLC, to NASSCO, Inc.
- June – Completed the sale of Formrite Companies, Inc. to G3 Industries, Inc.
2023 got off to an aggressive start in terms of valuations. However, deal flow remains constrained and there’s a notable gap between prices paid for top performers and everyone else. Private equity groups paid up at the start of the year as purchase-price multiples rebounded in spite of increasing cost of capital and challenges in the banking sector.
Active Broad Acquisition Searches
- Acquisition or partnership opportunities for buy-side client looking for automobile technology and power access companies with revenues less than $100 million.
- ESOP client looking to make acquisitions of highly engineered industrial equipment manufacturers with revenues between $10 million – $30 million.
- Acquisition opportunities for buy-side client looking for residential garage door services companies with revenues greater than $1 million.
- Acquisition opportunities for buy-side client looking for residential exterior repair & restoration companies in Southeast U.S. with revenues greater than $5 million.
- Acquisition opportunities for buy-side client 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.
Featured Insights
- 2023 Volume I Packaging & Printing Industry Report – Download the industry report here.
- Industrial Manufacturing Is Still Attractive to Buyers – Read the article here.
Market Statistics
Total Enterprise Value (TEV)/EBITDA*
| TEV | ’03-18 | ’19 | ’20 | ’21 | ’22 | YTD’23 | Total |
|---|---|---|---|---|---|---|---|
| 10-25 | 6.0 | 6.1 | 5.9 | 6.1 | 6.5 | 6.5 | 5.9 |
| 25-50 | 6.9 | 7.0 | 6.7 | 7.2 | 7.1 | 7.7 | 6.7 |
| 50-100 | 8.9 | 7.5 | 8.0 | 8.3 | 8.5 | 8.1 | 7.7 |
| 100-250 | 8.8 | 9.2 | 8.7 | 9.3 | 9.1 | 10.0 | 8.5 |
| Total | 7.3 | 7.1 | 7.0 | 7.6 | 7.6 | 8.0 | 6.8 |
TEV/EBITDA—By Industry Category*
| Industry | ’03-18 | ’19 | ’20 | ’21 | ’22 | YTD’23 | Total |
|---|---|---|---|---|---|---|---|
| Manufacturing | 6.8 | 6.5 | 6.7 | 7.1 | 7.3 | 7.0 | 6.4 |
| Business services | 7.1 | 7.2 | 7.1 | 7.3 | 7.4 | 9.0 | 6.9 |
| Health care services | 7.8 | 8.0 | 7.6 | 8.1 | 8.4 | 9.5 | 7.6 |
| Retail | 8.1 | 9.3 | 6.5 | 8.3 | 8.0 | 5.7 | 7.1 |
| Distribution | 6.9 | 7.0 | 7.5 | 7.2 | 7.2 | 6.5 | 6.8 |
| Media & Telecom | 7.8 | 9.4 | 8.3 | 6.3 | 9.1 | NA | 7.6 |
| Technology | 9.6 | 10.0 | 7.6 | 10.3 | 8.1 | 7.8 | 8.5 |
| Other | 7.2 | 6.5 | 6.2 | 7.3 | 6.7 | 9.6 | 6.4 |
Senior Debt/EBITDA—Splits by Period (platforms only)*
| TEV | Q221 | Q321 | Q421 | Q122 | Q222 | Q322 | Q422 | Q123 |
|---|---|---|---|---|---|---|---|---|
| 10-25 | 1.9 | 2.0 | 2.0 | 1.8 | 1.8 | 2.1 | 1.7 | 2.1 |
| 25-50 | 2.1 | 2.2 | 2.3 | 2.5 | 2.2 | 2.4 | 2.3 | 2.2 |
| 50-100 | 3.0 | 3.1 | 2.9 | 3.1 | 3.2 | 2.7 | 2.7 | 2.3 |
| 100-250 | 3.5 | 3.7 | 3.5 | 2.9 | 3.6 | 4.0 | 3.0 | 3.1 |
| Total | 2.6 | 2.6 | 2.6 | 2.6 | 2.7 | 2.7 | 2.3 | 2.4 |
*Source: GF Data®. Information included from GF Data may not be used or re-published without permission from GF Data or Taureau Group.
View the PDF version of M&A Quarterly.