Private Equity Valuation and EBITDA Multiples
Per McKinsey & Co., the amount of leverage employed in U.S. buyouts is at an elevated level. The two-year trailing average stands at 7.0x EBITDA. That compares with 6.4x in 2007, just prior to the Great Recession.
The article citing leverage multiples continues on with purchase price multiples, citing that the two-year trailing average multiple "reached a record 12.8 times EBITDA in 2020, compared with 9.4 times in 2007."
At some point history repeats, but persistently high-flying multiples and an accommodating Fed make it difficult to get too worked up. As investors, though, it's important to make certain we aren't lulled to sleep.
Source: Miriam Gottfried and Ben Dummett | “Private-Equity Firms Regain Taste for Giant Buyouts” | The Wall Street Journal | 4/21/2021 | Visit