I am learning about the GP stakes space, and I was wondering if anyone had any experience modelling out GP stakes (middle market) and private fund managers. I understand that traditional fee only AM are valued on a EV/EBITDA basis, however, given the uneven cashflows of smaller managers, what industry standard metrics are used for valuing the carry portion of revenue? Any insight on this or anything that would be helpful for modelling a GP stake would be much appreciated.
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GPs are typically valued off of blended DE (Distributable Earnings) multiple. DE is comprised of NFRE (net fee related earnings derived from aum), carried interest and GP income. Other common valuation approach is SOTP of the three income streams. NFRE is main driver as it gets like a 20-30x multiple as poster above mentioned. Carry stream and gp income stream are typically done on a DCF basis or haircut to accrued balance sheet value.