Q4 multiples soar     
Q4 2017 Q4 2016 Q3 2017 GF Data historical avg.
TEV/Ebitda 8.1 6.8 7.5 6.3
TEVEbitda % change 19.30% 7.00% 28.50%
Volume % change 19.30% 41.70%
Quality premium 127.10% 137.50% 106.10% 108.60%
Quality premium % point change -10.30% 21.10% 18.5
Size premium (TEV/Ebitda) 2.3x 1.9x 2.4x 1.3x
Size premium % change 24.40% -3.10% 73.30%
Source: GF Data

Valuation multiples continued to surge in the fourth quarter of 2017, according to GF Data. Deal pricing pushed upward to an average mark of 8.1 times Ebitda, a 19.3 percent increase over the year-ago fourth quarter (6.8 times) and a 7.0 percent jump from 3Q ’17 (7.5 times). The 8.1 times mark is a 28.5 percent increase over the GF Data historical average multiple of 6.3 times, which includes deals dating back to 2003.

Completed deal volume for the fourth quarter was up 19.3 percent over the corresponding quarter last year, and 41.7 percent higher than Q3 2017. GF Data reports on transactions completed by a pool of 201 private equity funds and other sponsors on transactions they complete in the $10 million to $250 million Total Enterprise Value (TEV) range, with TEV/Adjusted Ebitda multiples of 3 times to 15 times.

The active fourth quarter is notable given the anecdotal impression that some sellers once again pushed off end-of-year closings in anticipation of federal tax changes. Historically, fourth quarter volume is the highest volume quarter of the year, and averages approximately 25 percent higher volume than the following Q1.

Deals involving above average financial performers and businesses with higher enterprise values continue to command demonstrable premiums. The quality premium for above-average performers was 27.1 percent in Q4 2017, off 10.3 percentage points from the prior year period but still a remarkable 18.5 percentage point increase over the historical average. The premium for deals with larger enterprise values in 4Q 2017 was 2.3x Ebitda, up 24.4 percent from last year’s Q4 and up 73.3 percent from the GF Data historic average of 1.3 times Ebitda.

GF Data provides data on private equity-sponsored M&A transactions with enterprise values of $10 million to 250 million. GF Data gives private equity firms and other users more reliable external information to use in valuing and assessing M&A transactions.

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