Our investment bank serves mostly private company sellers. The buyers are a combination of public and private firms – strategics and PEGs (private equity groups). We do not seek out or negotiate with high-net-worth individuals. These persons are more likely to work with business brokers.
With that background, the key trends for 2020 transactions follow:
- Through Q3, EBITDA multiples were at 10-year highs. This may partly reflect that the volume of available sellers and deals closed were lower year-over-year. Thus, buyers were willing to pay more for a transaction fitting their platform.
- Since 2013, the private seller multiples have increased in seven of the eight years, reaching a trick over 4x.
- Typical, the multiples vary widely by industry sector. At the high end at 11.3x was Information. Conversely, Accommodation and Food Service was a low of 2.6.
Clear prognosticating is not our specialty. However, we offer these projections for 2021.
- The immense pent-up demand, exacerbated by the uncertainties of COVID, should result in many more sellers on the market.
- Year end financials will reflect how well or poorly each seller performed. The most coveted sellers are those who have captured the metrics of why they failed or succeeded as a result of COVID.
- The “best” sellers will be those who planned and prepared in 2020 for a 2021 exit.
- Transactions that occur in 2021 will likely include numerous COVID liabilities/restrictions and less cash and more earnouts.
- Sectors expected to receive the largest multiples are Information; Healthcare; Professional, Scientific, and Technical Services; Finance and Insurance; and Construction.