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[EDIT: the data in this paragraph is WRONG! See comment below.] 12x EBITDA? Unlikely. According to the article, the average valuation multiple for US deals to t
by cs702 4y ago
[EDIT: the data in this paragraph is WRONG! See comment below.] 12x EBITDA? Unlikely. According to the article, the average valuation multiple for US deals to take firms private is 19.3x EBITDA.
A 3% rate for a leveraged entity? Unlikely. Current high-yield spreads are in the neighborhood of 500-600bp, on top of treasury rates.
So, you'd need 60% more debt (19.3/12) to keep the same capital structure [EDIT: this last sentence is WRONG! The amount of debt needed would be the same, because the correct EV/EBITDA multiple is 12.3x. See comment below.], and the debt would be 2-3x more expensive, leaving much less margin for a downside scenario, say, in the event of a prolonged recession, rising rates, and/or declining valuation multiples. If all three of those things happen at the same time, things could get... ugly.
- mbesto 4y ago> According to the article, the average valuation multiple for US deals to take firms private is 19.3x EBITDA. That's on a PIPE, which is a small subsection of all PE buyouts. Average multiples for ALL buyouts is 12.3x in NA: Average buyout multiples in 2021 rose 9% to 12.3x in North America, and, despite a slight decline, still stood at a lofty 11.9x in Europe (see Figure 14). https://www.bain.com/globalassets/noindex/2022/bain_report_global-private-equity-report-2022.pdf https://www.bain.com/globalassets/noindex/2022/bain_report_g...
- balderdash 4y agoWith regards to your comment on the rates, most LBOs are done with floating rate loans/ bank loans/levers loans, as such they trade at a spread over libor/sofr, which chops ~3% off your interest rate…