The Ballooning Valuations In Private Equity Deals
The last decade has witnessed an avalanche of investor capital gravitating towards private equity, along with much richer deal valuations.

✒ Key takeaways:

  1. Private equity deals have been getting more expensive over the past decade, as measured by EV/EBITDA
  2. Multiples are hitting higher double-digit figures, and 20% of buyouts in 2021 estimated to be priced above 20x valuation multiple
  3. Factors driving higher valuations are likely to be (i) stock market (public) has been priced and traded at a premium, from which private equity derives valuations for deals; and (ii) the abundance of cheap money means more money chasing deals which heightens the level of competition

Final thought: to what extent can the increase in the EV/EBITDA multiple be explained by the changes in accounting standards over time, such as IFRS 16?