A recent Pitchbook article predicted that median US buyout multiples of 12x may be the new norm. But where do things stand in the Canadian mid-market?
Alan Chettiar, Partner, Investment Banking, sees strong continued demand in the space, “as buyers seeking better value come down to the mid and lower mid-market to do deals”. Chettiar points out that while he’s not seeing the 12X median EBITDA multiples associated with larger US companies, valuations are higher than they were 12 months ago. “It’s a very competitive environment for buyers,” he says. A larger universe of financial buyers is fueling competition, including private equity firms that historically wouldn’t have looked at the mid-market; new entrants, many of whom are US-based; and quasi-family office groups.
As for his outlook on valuations, Chettiar points out that short term, the recent Fed rate cut will continue to prop up demand from US buyers. Diverging from Pitchbook’s prediction, however, he cautions that “the potential trade war and its global implications make us question how long this high multiple environment will be sustained.”
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