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PE Sticks to Buy Low, Sell High

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March 19, 2015

The FT has a data rich piece on private equity’s ongoing big rush for the exit. It begins with an investors’ adage: when private equity sells, beware of buying.

PE funds have the luxury right now of being able to sell assets at premium prices due to frothy capital markets and heated M&A activity by strategic buyers in many industrial and consumer segments. We picked up on interest fact, based on dealogic data: during the downturn from 2009 to 2014, private equity invested USD 3.9 trillion at valuations with an average multiple of 6.5 times EBITDA . This contrast with today’s more inflated multiple, which is around 10 times EBITDA. The numbers show that the PE industry as a whole has not abandoned its basic adage: buy low, sell high.

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