Every year Bain and Company publishes the new edition of their “Global Private Equity Report” that highlights how private equity industry is evolving around the world and sheds light on the opportunities and headwinds in the sector.
For 2021, a big portion of the report, unsurprisingly, talks about how COVID-19 has impacted deal count and average values. Besides that, one of the things I found interesting was the following chart:
Average EV/EBITDA purchase price multiple for US buyout deals (Source: Bain and Company)What is evident from the chart is the following: the days of buying a company for a 3.0x EBITDA multiple and flipping it in few years for 7-10.0x EBITDA are over. More than two-thirds of all US buyout deals in 2020 had purchase prices of more than 11 times
EBITDA.
Due to heavy competition and a flood of investment capital—both debt and equity—
buyout multiples continued to defy gravity in 2020, averaging 11.4 times EBITDA in the US.
This makes the job of GPs even tougher than before: to have attractive returns, the importance of effective value creation is higher than ever before.
