M&A Quarterly – March 2018
by Ann Hanna
Market Summary
- Q4 2017 averaged 8.1x TTM Adjusted EBITDA, which surpassed the previous record of 7.5x set in Q3 2017.
- The two industries realizing the highest EBITDA multiples for 2017 were technology and media & telecom at 10.2x and 8.2x, respectively. EBITDA multiples for all manufacturing companies averaged 6.9x, which is 0.8x above historical averages.
- On average, larger buyouts command a higher EBITDA multiple compared to smaller buyouts. The spread on size premiums for larger-sized deals between $50 million and $250 million compared to deals between $10 million to $50 million was 2.0x for 2017 and slightly above the average historical level of 1.9x.
- Platform buyouts had a larger average EBITDA multiple than add-ons for 2017, 7.4x to 7.0x, respectively.
- Buyers continued to reward businesses with premiums for above-average financials (TTM revenue growth and EBITDA margins above 10%, or one above 12% and the other 8%) for 2017. Buyouts for businesses with above-average financials averaged 7.8x versus 6.5x for all others, which is a premium of 20% and is in line with 2016 and 10% above historical levels.
- Senior debt/EBITDA multiples across all industries remained at the elevated levels established earlier in 2017 and in Q4 2017 were 3.5x.
- Because of the uptick in valuations, buyers are also required to contribute more equity into a deal. In Q4 2017 buyers on average contributed 47.1% equity to transactions.
What’s New at Taureau Group
- November – Engaged by a pharmaceutical products company to advise on a potential sale
- January – Tyler Carlson and Michael Schroeder promoted as vice presidents
- January – Engaged by a waste management company to advise on a potential sale
- January – Engaged by a construction products company to advise on a potential sale
- February – Tom Venner joined Taureau Group as an analyst
- February – Completed investment and recapitalization of a marine chemical company
- February – Continue to seek add-on acquisition opportunities for buy-side clients in the plastics manufacturing and niche technology industries
Save the date for BizTimes Media’s M&A Forum on Wednesday, March 21 at the Pfister Hotel in Milwaukee. Learn more about the forum→
Market Statistics
Total Enterprise Value (TEV)/EBITDA*
| TEV | ’03-12 | ’13 | ’14 | ’15 | ’16 | ’17 | Total |
|---|---|---|---|---|---|---|---|
| 10-25 | 5.5 | 5.8 | 5.5 | 5.8 | 5.9 | 6.4 | 5.6 |
| 25-50 | 6.1 | 6.8 | 6.4 | 6.6 | 6.5 | 6.7 | 6.3 |
| 50-100 | 6.7 | 6.6 | 7.5 | 7.8 | 7.3 | 8.3 | 7.0 |
| 100-250 | 7.2 | 7.1 | 7.5 | 9.0 | 9.0 | 9.2 | 7.9 |
| Total | 6.0 | 6.4 | 6.4 | 6.7 | 6.8 | 7.4 | 6.3 |
TEV/EBITDA—By Industry Category*
| Industry | ’03-12 | ’13 | ’14 | ’15 | ’16 | ’17 | Total |
|---|---|---|---|---|---|---|---|
| Manufacturing | 5.9 | 5.9 | 6.1 | 6.6 | 6.2 | 6.9 | 6.1 |
| Business services | 6.0 | 6.5 | 6.1 | 6.3 | 7.3 | 7.5 | 6.3 |
| Health care services | 6.8 | 7.2 | 7.2 | 7.8 | 7.6 | 8.1 | 7.1 |
| Retail | 6.3 | 7.4 | 6.0 | 5.5 | 7.1 | 7.6 | 6.5 |
| Distribution | 6.0 | 6.5 | 7.1 | 6.7 | 7.4 | 7.6 | 6.4 |
| Media & telecom | 7.3 | 5.5 | NA | 6.4 | 6.7 | 8.2 | 7.2 |
| Technology | 6.6 | 9.5 | 7.7 | 8.0 | 7.4 | 10.2 | 7.5 |
| Other | 5.8 | 6.0 | 6.4 | 5.6 | 7.1 | 6.6 | 6.0 |
Senior Debt/EBITDA—Splits by Period*
| TEV | Q116 | Q216 | Q316 | Q416 | Q117 | Q217 | Q317 | Q417 |
|---|---|---|---|---|---|---|---|---|
| 10-25 | 2.5 | 2.7 | 2.7 | 2.7 | 3.3 | 2.7 | 4.5 | 4.0 |
| 25-50 | 2.7 | 3.1 | 2.9 | 2.3 | 2.8 | 3.2 | 2.7 | 3.0 |
| 50-100 | 2.8 | 4.0 | 2.8 | 2.9 | 2.9 | 4.6 | 3.0 | 3.9 |
| 100-250 | 3.4 | 3.5 | 4.7 | 3.5 | 3.7 | 3.8 | 4.2 | 3.5 |
| Total | 2.8 | 3.3 | 3.2 | 2.8 | 3.1 | 3.6 | 3.7 | 3.5 |
*Source: GF Data®. Information included from GF Data may not be used or re-published without permission from GF Data or Taureau Group.
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