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US middle market PE deal volume slows in the second quarter of 2012

The brisk acceleration in middle-market private equity deal volume seen in the last half of 2011 and the first quarter in 2012 stalled out somewhat in the second quarter of 2012, according to GF Data’s second-quarter report.

GF Data issues reports, available to subscribers, on M&A transactions in the USD 10-250-m value range completed by middle-market private equity firms. One hundred and sixty-nine contributing PE firms reported 30 completed deals in the second quarter of 2012, well off the average of 45 deals reported in each of the preceding three quarters.

Not all brackets in the middle market experienced a slowdown in completed deals, according to GF. The 30 deals reported by GF Data contributors show that the trend toward higher premiums paid for larger companies continues.

Throughout the first half of 2012, companies in the USD 50-250-m valuation range commanded prices, on average, of 6.9 times trailing twelve months adjusted EBITDA, compared to 5.6 times TTM for companies inthe USD 10 – USD 50 m range.

Quality, as evidenced by above-average financial performance based on revenue growth and EBITDA margins, also continued to command a premium. Businesses with above-average financial characteristics sold for an average five % premium over other firms. The health-care services sector continued to shine, posting average multiples of 7.9 times TTM EBITDA.

Aggregate total and senior debt levels have remained essentially unchanged since 1Q, according to B. Graeme Frazier, IV, GF Data’s principal and co-founder. While leverage multiples are disclosed only to subscribers and contributors, Frazier observed that the data tracks and highlights the disparity in valuation by deal size.


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