“Not only is that number the highest level in years, but it also surpasses the 9.7 times seen in 2007, the peak of the buyout boom,” wrote Dow Jones and WSJ private equity reporter Shasha Dai. “That peak valuation level nose-dived soon thereafter amid the financial crisis.” Steven Miller, managing director, at S&P Capital IQ’s LCD unit, said he thinks multiples have climbed for two reasons according to Shasha Dai: Until the most recent stock market declines, high public stock market comparables were pushing prices higher. In addition, buyout firms have felt “the competitive pressure from strategic buyers, which, as you know, were doing deals at a record pace and able to use stock as currency and justify deals via synergies and cost [savings].
“I don’t see how [multiples] can get higher from where they were in 2015, so in that sense, we are likely at a peak,” added S&P’s Mr. Miller, according to Dow Jones LBO Wire.EBITDA stands for earnings before interest, taxes, depreciation and amortization. Enterprise Value/EBITDA (more commonly referred to by the acronym EV/EBITDA) is a popular valuation multiple used in the finance industry to measure the value of a company. The enterprise multiple looks at a firm as a potential acquirer would, because it takes debt into account – an item which other multiples like the P/E ratio do not include.]]>