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June 2017 | Issue 86 Background Constellis Group,  Inc. is a private security firm.  In December 2013, the Company formed an Employee Stock Ownership Plan (“ESOP”), which purchased 100% of Constellis’s voting stock.  Wilmington Trust NA was named Trustee of the ESOP.  Less than a year after the ESOP was created, the ESOP sold all […] More...


March 2017 | Issue 85 Introduction Richard and Steven Parker are brothers who ran a flower business in Scotch Plains, New Jersey.  Richard is the President of Parker Interior Plantscapes (“PIP”), which installs and services plants and flowers in commercial settings.  Steven is the President of Parker Wholesale Florists (“PWF”), which is a garden center.  […] More...

Dell Appraisal Spawns a Multitude of Valuation Approaches

February 2017 | Issue 84 Introduction A Delaware Chancery appraisal case involving computer company Dell Inc. gave rise to a multitude of valuation measurements.  It is instructive to see how the court sorted through them in coming up with its final appraisal conclusion.  The case is In re Appraisal of Dell Inc., 2016 Del. Ch. LEXIS […] More...

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Middle Market Deal Valuations Held Steady in 2009

February 2010 | Issue 44

Although middle market deal volume declined substantially in 2009, valuations held relatively steady. This, according to GF Data Resources, producers of a proprietary database that provides detailed data on middle market private equity transactions (those with a purchase price of between $10 million and $250 million).

For the year 2009, GF’s data contributors reported a total of 65 middle market transactions, down by almost half from a total of 124 in 2008. There’s some sign that transaction activity is recovering, however. There was a pickup in the number of transactions in the fourth quarter, with 20 deals closing in Q4 2009 as compared to an average of 15 per quarter for the first nine months of the year.

Prices Down Only Slightly
Despite this decline in the number of transactions, prices held up pretty well.  The primary valuation metric, Total Enterprise Value as a multiple of adjusted Earnings Before Interest, Taxes, Depreciation and Amortization (TEV/EBITDA), averaged 5.7X for 2009, down only slightly from 5.8X in 2008.

As has been the case in past years, transaction size had a major impact on deal pricing. For the smallest category of transaction, (total enterprise value of from $10 to 25 million), the average ratio of total enterprise value to EBITDA was 4.9 X.  For the largest transactions, ($100 to 250 million), this ratio was 6.5 X.

More Equity Needed
Lenders continued in 2009 to maintain the cautious outlook toward financing buyout transactions that they had begun to adopt in the fall of 2008.  Total debt on 2009 transactions averaged 2.4 X EBITDA, (versus 3.1X in 2008). Senior debt averaged 1.7X EBITDA in 2009, as compared to 2.3X in 2008.  Senior debt initial interest rates averaged 6.6% in 2009, down from 7.0% in 2008. As a result of declining debt levels, average equity contributions to transactions remained high, at 58.9% in 2009 as compared to 48.5% in 2008.

The Cost of Doing a Deal
GF also keeps track of buyers’ transaction expenses.  For 2009, these expenses averaged 4.3% of deal price, down from 4.5% the year before.  This works out to about three months worth of EBITDA for the average deal.