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Did you know? 12 Things about the US Mid-Market Private Capital Market Transactions in 2014

July 23, 2015 - An article by Homeric Arvanitis, BComm, ASA-BV



1. Did you know that the required rates of return for Mezzanine funds were between 8% and 16%?


2. Did you know that the required rates of return for Private Equity groups were between 25% and 30%?


3. Did you know that the required rates of return for Venture Capital firms were between 25% and 33%?


4. Did you know that the required rates of return for Angel investors were between 25% and 30%?


Private Capital Market Required Rates of Return


Private Capital Market Required Rates of Return


5. Did you know what the major reason (29%) for sell side mandates not closing was? Valuation gap in pricing!


6. Did you know that, of those transactions that didn't close due to valuation gap in pricing, approximately 35% had a valuation gap in pricing between 21% and 30%?


Valuation Gap in Pricing for Transactions That Didn’t Close


Valuation Gap in Pricing for Transactions That Didn’t Close


7. Did you know that, of the various multiple valuation methods used by Investment Bankers when valuing privately-held businesses, 58% used the recast (or adjusted) EBITDA multiple?


Usage of Multiple Methods


Usage of Multiple Methods

8. Did you know that the average deal multiples on transaction in 2014 observed by Investment Bankers varied between 4.5 (for companies with EBITDA of $1M or less) and 8.6 (for companies with EBITDA of greater than $50M)?


Median Deal Multiples by EBITDA Size of Company


Median Deal Multiples by EBITDA Size of Companyethods


9. Did you know that 31% of the business sale transactions involved a contingent earn out?

10. Did you know that 52% of the closed sales transactions involved strategic buyers?


Percent of Transactions Involved Strategic and Financial Buyers


Percent of Transactions Involved Strategic and Financial Buyers

11. Did you know that 26% of the strategic buyers did not witness any premium, while 29% saw premiums between 11 and 20%?


Premium Paid by Strategic Buyers Relative to Financial Buyers


Premium Paid by Strategic Buyers Relative to Financial Buyers

12. Did you know that approximately 61% of the closed business transactions that involved financial buyers were platform investments?


Percent of Transactions Involved Strategic and Financial Buyers


Percent of Transactions Involved Strategic and Financial Buyerss


*Reference:
2015 Capital Markets Report - Pepperdine Private Capital Markets Project
by Dr. Craig R. Everett
Assistant Professor of Finance
Director, Pepperdine Private Capital Markets Project



*Items #5 to #12 were based on 104 Mid Market Investment Banker respondents






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