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Market Overview

GF Data Resources 4Q Report Shows Modest Uptick in Middle Market Deal Volume


GF Data Resources’ latest Middle Market Report indicates a modest but pronounced uptick in completed deal volume in 4Q, closing out a cautious year for middle market dealmaking, with just 65 transactions completed in the GFDR universe in 2009, compared to 124 in 2008, and 158 in 2007.

The 4Q data, provided to GF Data Resources by 131 actively participating private equity firms reporting on transactions valued between $10 and $250 million, indicates 20 transactions were completed in the fourth quarter of 2009, up from the 14-16 deals completed in each of the three prior quarters, though still below peak volume of about 40 deals per quarter throughout 2006 and the first half of 2007.

Average pricing for transactions in 4Q remained low at 5.2x trailing twelve months adjusted EBITDA, compared to 5.1x in the prior quarter.

GF Data Resources collects, analyzes and reports on middle market private equity sponsored M&A transactions. Contributors and subscribers have exclusive access to detailed quarterly reports including extensive valuation and leverage data, breakdown by NAICS code through GFDR’s searchable online utility, and a new key deal terms quarterly report. For information on subscribing, or on contributing data as a private equity participant, visit The full 4Q Report is available to subscribers only.

“Middle- market deal volume in the past year has continued to be dampened by economic uncertainty, skittish capital markets and erratic performance at the individual company level,” said Andrew T. Greenberg, CEO and Co-Founder, GF Data Resources, LLC. “Not surprisingly, the data shows a record low number of deals completed for the year, as buyers waited for lenders to return to the market and seller expectations to lower. The good news is there was a small but significant increase in the number of deals in Q4. There is a good chance that the 2010 data will reflect a continued boost in volume and a stabilization in multiples as buyers and sellers alike become more confident in the market.”

“The increase in deal volume in Q4 appears to be at least in part due to the trend towards a bifurcated market which we discussed at length in the Q3 report,” said B. Graeme Frazier, IV, Principal and Co-Founder, GF Data Resources. “More prospective sellers with good but not exceptional financial characteristics have reconciled themselves to reduced multiples and entered the market. At the same time, the handful of high-quality properties being offered for sale continue to benefit from scarcity value and command multiples closer to pre-downturn highs.”

The GF Data Resources database draws from data provided by the 140 participating private equity firms on 1,065 transactions closed between January 1, 2003, and December 31, 2010. One hundred and thirty one of these firms provided information on deals included in the 4Q report.

“The trend from Q3 to Q4 in 2009 presages what we believe will be a very active 2010,” said Bob Landis, Partner, The Riverside Company. “Investment bankers have indicated a significant pick up in ‘deal pitches’ to secure sell side mandates in Q4 and the onset of this year. In addition, lenders appear to be cautiously opening their purse strings, which will be a major driver for increased deal flow and acquisition opportunities in 2010. We also believe that seller expectations are now beginning to align with what private equity firms are modeling for a reasonable return on their new investments. We think the numbers that GF Data Resources will be publishing in 2010 for Q1, Q2, and especially Q3 will bear this out.”

“Buyer and seller expectations are more in sync now than they were a year ago,” said Ron Miller, Managing Director, Cleary Gull, Inc. “By all accounts, 2009 was a slow year for dealmaking, however, as evidenced by the data, deal volume is picking up. Company performance has begun to improve, or at least stabilize, both strategic buyers and financial buyers are actively looking for deals and the credit markets are slowly improving. All signs point to continued gradual improvement in the M&A market this year.”

Data Highlights:

High-level valuation and volume data for the past eight quarters follows. GF Data Resources’ reports provide data contributors and subscribers with similar detail on capital structure, leverage and key deal term trends.

All Transactions   1Q 08   2Q 08   3Q 08   4Q 08   1Q 09   2Q 09   3Q 09   4Q 09
# of Deals   24   34   35   31   14   15   16   20
TEV/EBITDA 5.6x   5.6x   6.2x   5.9x   6.0x   6.7x   5.1x   5.2x
  • Deal volume increased moderately in Q4, but pricing on those deals remained low – 5.2x, compared to to 5.1x trailing twelve months (TTM) adjusted EBITDA in the prior quarter. The average multiple for all of 2009 was 5.7x.
  • Private equity contributors in late 2008 began identifying acquisitions as platform companies or add-on acquisitions. Across 122 2008-09 deals, private equity buyers paid an average of 5.8x for platform properties, 1.0x more than for add-ons.
  • While transaction volume remains concentrated in the $10-100 million TEV range, deal activity in the $100-250 million bracket is starting to pick up, consistent with anecdotal reports of greater activity among larger buyers and lenders.
  • The return of sellers with good but not exceptional financial characteristics in the second half of 2009 is unmistakable. Of the 20 buyouts completed in the first two quarters of this year, 13 – or 65% -- were above-average performers, consistent with the general perception of a “flight to quality.” Of the 31 buyouts completed in the second half of the year, only 11—or 36%– met this standard.
  • The 24 “above-average” (defined as businesses with TTM EBITDA margins and revenue growth both in excess of 10 percent) performers in 2009 traded at an average of 5.8x TTM adjusted EBITDA. The 27 other buyouts were valued at an average of 5.1x. This 13 percent premium is the highest for any year in the GFDR database, which dates to 2003.

About GF Data Resources

GF Data Resources provides data on private equity-sponsored M&A transactions with enterprise values of $10 to 250 million. The data provides private equity firms and other users more reliable external information to use in valuing and assessing M&A transactions. Transaction information is collected from private equity groups on a blind and confidential basis. Data contributors and paid subscribers receive two products -- high-level valuation and leverage data in electronically delivered quarterly reports, and continuous access through the web site to detailed valuation data organized by NAICS industry code.

For information on subscribing, or on contributing data as a private equity participant, contact us at

BackBay Communications
Jen Dowd, 212-209-3844

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