M&A Newsletter – December 2021
by Taureau Group
Market Summary
- TEV/EBITDA in Q3 2021 averaged 7.6x – the highest quarterly mark recorded in the past 16 years – above the 7.2x in the previous quarter. The jump in total debt from 3.6x to 4.1x was a contributing factor as buyers on average were paying more but were able to reduce average equity contribution slightly.
- The two industries showing the highest EBITDA multiples through Q3 2021 were technology and media & telecom, at 8.2x and 7.9x, respectively. EBITDA multiples for all manufacturing companies averaged 7.0x, which is above historical averages of 6.2x.
- On average, larger buyouts continued to receive a premium to EBITDA multiples. The spread in valuation between deals completed in the $50-$250 million TEV range compared to deals in the $10-$50 million TEV range was 2.0x through Q3 2021, which remains in line with historical averages.
- Recent data is showing a continued gap between companies with above-average financials (TTM revenue growth and EBITDA margins above 10% or one above 12% and the other 8%) and those without; buyouts for businesses with above-average financials averaged 7.8x vs. 6.1x for all others, a premium of 28%, essentially the same as in 2020.
- Platform buyouts averaged slightly higher EBITDA multiples than add-ons through Q3 2021, 7.4x compared to 6.5x, respectively, which is in line with historical averages.
- The lending market may be returning to pre-COVID form as senior debt levels averaged 3.1x in Q3 2021, which is consistent with the average debt levels in the periods prior to COVID.
What’s New at Taureau Group
- September – Completed the acquisition of a music production company for an ESOP client.
- September – Ann Hanna presented at the ACG Wisconsin Women’s Network meeting.
- October – Completed valuation assessment for a metal fabrication company in the construction industry.
- October – Published its Q3 2021 Medical Device Industry Report. Download the report here.
- November – Taureau Group proudly sponsored this year’s BizStarts Hall of Fame event.
- November – Completed valuation assessment for a paint application and custom design company in the automotive industry.
- December – Ron Burgers joined Taureau Group as an Analyst.
- December – Published its Q3 2021 Packaging & Printing Industry Report. Download the report here.
- December – Completed the sale of Racine Metal-Fab, Ltd. to Midwest Products & Engineering (MPE-INC), a portfolio company of BPOC.
- December – Announced promotions including: Tyler Carlson to Director, Michael Schroeder to Director, Nick Mydlach to Vice President, Tom Venner to Senior Associate, and Jake Mende to Senior Analyst.
- December – Completed the sale of Stay-Lite Lighting, Inc. to Orion Energy Systems, Inc.
- December – Completed the sale of the K-12 Computing Division of Technology Resource Advisors, Inc. to ITsavvy, LLC.
The third quarter of 2021 was one of those rare periods in which actual valuations were on par with the deal community’s collective sense of a torrid seller’s market. Volume was up slightly from a year-ago third quarter, and valuations were at the highest quarterly mark seen in recent years. One factor contributing to the pricing lift is a greater prevalence of platform acquisitions, which tend to be more highly valued than add-ons..
Active Broad Acquisition Searches
- ESOP client looking to establish new platforms in a broad variety of niche manufacturing and business service industries with EBITDA of $2 million or more and total enterprise values greater than $10 million.
- ESOP client looking to make acquisitions of highly engineered industrial product manufacturing or engineering companies with less than $20 million of revenue.
- 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 metal fabricators with manufacturing facilities in Southeast U.S. with revenues between $5 million – $50 million.
- Acquisition opportunities for buy-side client looking for steel erectors focused on Southeast U.S. market with revenues less than $40 million.
Featured Articles
- Hot M&A Run in Tech & Tech Services Continues – Read the article here.
- Packaging & Printing M&A Remains Attractive – Read the article here.
Market Statistics
Total Enterprise Value (TEV)/EBITDA*
| TEV | ’03-16 | ’17 | ’18 | ’19 | ’20 | YTD’21 | Total |
|---|---|---|---|---|---|---|---|
| 10-25 | 5.6 | 6.3 | 5.9 | 6.1 | 5.9 | 6.0 | 5.7 |
| 25-50 | 6.2 | 6.6 | 6.8 | 6.9 | 6.8 | 7.1 | 6.5 |
| 50-100 | 6.9 | 8.2 | 8.8 | 7.5 | 8.0 | 8.2 | 7.3 |
| 100-250 | 7.7 | 9.0 | 8.7 | 9.3 | 8.6 | 8.9 | 8.2 |
| Total | 6.2 | 7.2 | 7.2 | 7.0 | 7.0 | 7.2 | 6.5 |
TEV/EBITDA—By Industry Category*
| Industry | ’03-16 | ’17 | ’18 | ’19 | ’20 | YTD’21 | Total |
|---|---|---|---|---|---|---|---|
| Manufacturing | 6.0 | 6.8 | 6.9 | 6.5 | 6.7 | 7.0 | 6.2 |
| Business services | 6.2 | 7.3 | 7.1 | 7.1 | 7.0 | 7.1 | 6.6 |
| Health care services | 7.0 | 8.1 | 7.8 | 8.4 | 7.8 | 7.9 | 7.3 |
| Retail | 6.4 | 7.3 | 7.5 | 9.3 | 6.9 | 7.0 | 6.8 |
| Distribution | 6.3 | 7.6 | 6.9 | 7.0 | 7.5 | 7.6 | 6.7 |
| Media & Telecom | 7.0 | 7.7 | 7.8 | 7.0 | 8.3 | 6.7 | 7.2 |
| Technology | 7.1 | 9.9 | 9.6 | 10.0 | 7.7 | 8.2 | 7.9 |
| Other | 5.9 | 6.5 | 7.0 | 6.5 | 6.3 | 6.6 | 6.1 |
Senior Debt/EBITDA—Splits by Period*
| TEV | Q419 | Q120 | Q220 | Q320 | Q420 | Q121 | Q221 | Q321 |
|---|---|---|---|---|---|---|---|---|
| 10-25 | 3.2 | 2.9 | 4.0 | 2.7 | 3.0 | 4.3 | 2.9 | 2.3 |
| 25-50 | 2.9 | 3.0 | 2.2 | 2.6 | 2.9 | 3.3 | 2.5 | 3.6 |
| 50-100 | 3.1 | 3.4 | 2.2 | 2.6 | 2.9 | 3.2 | 2.9 | 3.1 |
| 100-250 | 3.8 | 4.9 | 2.6 | 3.2 | 4.0 | 3.6 | 3.5 | 3.6 |
| Total | 3.1 | 3.5 | 2.7 | 2.7 | 3.1 | 3.6 | 2.8 | 3.1 |
*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