Introduction
Transaction activity in the middle market, measured both in terms of deal value and deal volume, fell in the fourth quarter of 2022, continuing a year-long skid in deal activity realized in 2022 against the backdrop of rising interest rates and looming economic threats.
Through the first three quarters of 2022, deal multiples held steady at levels seen in the more active quarters of 2021. This trend reversed itself in the final quarter of 2022, as multiples across all tranches of deal sizes fell. Multiples on deals valued in the $100 to $250 million range fell to 7.6x in the fourth quarter from an unusually high multiple of 12.8x in the third quarter and just over 9x in the prior six quarters per GF Data. While short-term fluctuations in median deal multiples could have many explanations, one could view the reduced pricing metrics during Q4 as a response to the looming economic clouds that appear to be on the horizon. Many industries have experienced record high levels of profitability during 2021 and 2022, which, paired with both higher interest rates and expectations of slowed growth or even decline in the short-term, creates an obvious negative pressure on transaction multiples.
Also in This Issue
U.S. Deal Value & Volume
EBITDA Multiples
EBITDA Multiples by Buyer Type
U.S. Deal Volume by Industry
Debt Multiples
Number of Deals by Buyer Type