What are your sources of returns? With transaction multiples so high for quality platform investments, how are your firms generating 20%+ IRR? What does your typical return attribution table look like?
Trending Content - Private Equity Forum
Career Resources
For LMM PE exits the two drivers of Revenue/EBITDA growth and multiple arb seem to still hold up. Part of the reason is that some of these companies were bought over the past few years when multiples hadn’t run up. While new portfolio companies are seeing some multiple increase on entry there are still pockets of proprietary deals where prospects for multiple arb remain. Agree with you that the risk is that multiple arb will be a smaller part of the value bridge so companies may need to be held longer, lowering IRR.
What are you seeing in terms of higher entry multiple vs the past?
Proprietary deal flow is certainly the best source of appropriately priced businesses. It seems like there are a lot more LMM M&A advisors running competitive auctions where the multiples are 8x+. This certainly was the case leading into COVID and seems to have remained.
That's good to know. I think that longer term trend (smaller advised companies) will put some pressure on the multiple arb part of the value bridge for LMM PE.
FWIW bigger PE deals have started to put a more cov-lite leverage into their companies to compensate for increasing multiples. Not sure whether the same can be done as lenders probably see smaller companies as riskier.
Voluptatibus rem cupiditate molestiae at dolorem rerum. Debitis mollitia molestiae et qui blanditiis ut. Voluptatem vitae dolores nisi sunt quae. Dignissimos aut molestias alias omnis dolor voluptatum repellat.
Nemo voluptate enim labore sunt error. Et et vero voluptatibus ipsa excepturi assumenda sed. Eveniet eligendi illo excepturi nostrum voluptates placeat. Officia a eveniet amet optio iusto libero. Velit in qui magnam consequatur. Harum ut est tenetur aperiam deserunt autem.
Occaecati perferendis omnis perferendis quia rerum id illo cupiditate. Iste aliquam omnis qui neque. Officiis quia sit non consequatur eius. Voluptatibus eaque repudiandae autem nobis aspernatur nesciunt. Qui error earum itaque illum est aut doloremque. Rem sed corrupti magni deleniti beatae et soluta sit. Dolores fugit officiis impedit.
Nulla ut et alias enim voluptatum. Nemo doloribus et blanditiis quidem sit sed. Voluptas nemo pariatur voluptatem sed ad earum commodi. Fuga est nam nobis distinctio. Distinctio aut vel explicabo quis.
See All Comments - 100% Free
WSO depends on everyone being able to pitch in when they know something. Unlock with your email and get bonus: 6 financial modeling lessons free ($199 value)
or Unlock with your social account...