2016 Private Capital Markets Report
Pepperdine University recently released their "2016 Private Capital Markets Report". The report is part of the Private Capital Markets Project- an "ongoing research to understand the true cost of private capital across market types and the investment expectations of privately-held business owners".
The Report surveyed investment bankers, private equity professionals, bank and asset based lenders, mezzanine funders, venture capitalist, angel investors, business brokers, and business owners. Questions ranged from deal sizes, underwriting criteria, valuation multiples, financing outlook , and more.
We have include some highlights below.
-- Bank and asset based lenders reported that 95% of senior loans under $5 million require a personal guarantee.
-- Bank and asset based lenders reported that senior leverage EBITDA multiples for companies with less than $1M EBITDA was 1X, $1-5M was 1.3X, and $5-10M was 1.5X.
-- Average deal multiples on transactions from the prior twelve months, as observed by investment banking respondents, varied from 4.6 to 8.0. Under $1M EBITDA saw and average EBITDA multiple of 4.6X and $1-5M saw an average 5.3X multiple.
-- Approximately 35% of business sales transactions closed in the last 12 months involved contingent earnout, 27% included seller financing/seller note, and 24% included an equity roll over.
-- According to the i-bankers surveyed, "There is a reported shortage of capital for companies with less than $5 million in EBITDA but a general surplus for companies with $5 million in EBITDA or more."
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