Size Trumps Performance in the Mid-market; GF Data


February 21, 2012

A new report from GF Data, which is a subscription-only data provider for the PE industry, says that overall valuations in the mid-market were up in 2011. One of the trends it notes is that valuations for larger sized companies are at a premium.


Smaller companies that have good balance sheets and performance are valued lower. “Private equity investors in the middle market are paying significantly higher multiples to acquire larger firms, while the premium investors place on above-average financial performance is diminishing,” GF Data said in the report.

Highlights from the current GF Data report are listed here

  • Aggregate deal valuations in 2011 were 6.1x, up from an average of 5.9x in 2010.
  • Total and senior debt multiples are averaging in the mid-threes and mid-twos, after being in slightly higher, between the “low twos and low threes” for the previous five quarters.
  • Equity as a share of average capital structure dropped from levels above 50% to 48.2% 2011, which GF Data attributed to the rise in available leverage.
  • Senior-debt borrowing costs did not increase in step with rises in the 90-day LIBOR rate. Spreads dropped from LIBOR plus 5.65% in Q2 to LIBOR plus 4.1% in Q4.

GF Data’s 2011 year-end report includes valuation, volume, leverage and key deal-term data on 1,332 private equity backed transactions in the USD10-250 million value range completed since 2003. The data reflects deal activity by 185 private equity firms, including 166 active contributors.

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