PHILADELPHIA (April 17, 2015) — CMF Associates, a leading provider of financial, operational, and human capital solutions to private equity, middle-market, and small cap public companies, today released the results of surveys completed by private equity executives at the Association for Corporate Growth’s InterGrowth conference in Orlando, FL, April 13-15, 2015, and compared them with the results from the same surveys conducted at InterGrowth in 2014, 2013, and 2012.
Surveyed purchase multiples averaged less this year than last year, with 15% of respondents indicating a purchase multiple in the 8X range and 15% of respondents indicating a greater than 9X range, versus 33% and 18% last year, respectively. Furthermore, 40% indicated purchase multiples in the 7X range in 2015, versus 20% in 2014.
Qualitatively, while this decrease in pricing might seem surprising, we heard during our 68 meetings with middle market private equity funds, that many groups are spending less time in high-price auction processes, and focusing more on leveraging their executive network to find less broadly-marketed investment opportunities. This indicates that middle market private equity is demonstrating some caution regarding purchase price risk.
Secondly, the peak average time to close a deal has increased to six to eight months, up from four to six months in 2012, 2013, and 2014. There was also a drop in the number of respondents seeing a process take four to six months, and an increase in both the “less than three months” range and the “greater than one year” range. Overall, the data indicates that the timing on deal processes is more evenly distributed than in prior years.
Finally, there is optimism within the portfolio regarding aggregate revenue growth in 2015, with the peak (40%) in a range of 10-15% increase over the prior year, compared with peak respondents in 2012, 2013, and 2014 indicating a range of 5-10%.
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