Private Equity Professional

The Tide is High, But We’re Holding On

GF Data’s 230 active private equity contributors completed 117 transactions in Q4 2020 meeting the data tracking firm’s parameters – Total Enterprise Value (TEV) of $10 million to $250 million and TEV/Trailing Twelve Months (TTM) Adjusted EBITDA of 3x to 15x.

In addition, following a dip in aggregate deal pricing in Q3, average valuations bounced back in the fourth quarter to 7.0x TTM Adjusted EBITDA.

“The story of the December quarter is a story about volume, reflecting varying measures of pent-up seller interest, normalizing financial results, and business models validated or enhanced by the extraordinary demands of last year,” said Andrew Greenberg, the CEO of GF Data.

“With the recovery in valuations,” added Mr. Greenberg, “the aggregate mark returned to close to the 7.1x to 7.4x range that prevailed in the several years heading into 2020. This lends support to our assessment last quarter that the overall ‘COVID-19 effect’ in the market was to dampen valuations by .3x to .4x.”

“Total debt also continued to edge up toward pre-pandemic levels, coming in at 3.8x in Q4 – just below the 3.9x to 4.1x range we saw in prior years,” said B. Graeme Frazier, IV, GF Data’s co-founder and principal. However, after lagging for an added quarter, senior debt popped up to 3.2x.”

“While this meant the subordinated debt slice of average capital structure settled back to a more normal 8.5% after swelling to 14.4% in Q3, we expect junior capital to remain highly coveted and highly competitive, as is always the case in more discerning markets,” added Mr. Frazier.

“The recovery of deal activity in the later part of Q3 and then in Q4 was remarkable,” said Chris Godwin, a managing director at Gen Cap

America. “Like many others, with the bounce back in the market heading into the fourth quarter, we remained busy through the end of the year. Our team is seeing encouraging signs that this momentum will continue in 2021.”

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