A February 19th article in Private Equity Professional Digest titled The Resilient Middle Market Delivers Again: Deal Volume and Valuations Held Steady in Q4 points out that “middle market deal volume and valuations held steady from the third quarter to the fourth quarter of 2008, but the economic crisis severely impacted debt levels, which declined dramatically, according to GF Data Resources (GFDR), a proprietary database that collects data on private-equity transactions valued between $10 million and $250 million.”

In its Q4 report GFDR identified several trends regarding the current state of the market that lower middle-market business owners will want to take note of:

1. Average multiples on buyout transactions dropped from the mid-6.0x range in the first half of 2007, and have remained in the 5.8x – 6.0x range since.  Valuations have held up particularly well in the $50 million – $100 million TEV tier, where companies appear to benefit from being large enough to mitigate at least some of the risks relating to scale, but still small enough to get financing in the current credit market.
2. To measure the extent to which good companies have Read the rest of this entry »