As usual, though, headline numbers tell a slightly different story than do the details. In this case, the rise of smaller buyouts and particularly add-ons helped compress overall median EBITDA levels while inflating deal totals. As we’ve mentioned in the past, the “buy-and-build” strategy of adding on to platforms began in earnest in 2013, a trend neatly reflected in the orange line above.
Once EBITDA levels are broken out by buyout size, the difference becomes all the more transparent: The median multiple for sub-$25 million buyouts, which includes many add-ons, is less than half (5.6x) of the median valuation commanded for $2.5 billion+ buyouts (12.3x) over the same time-span.
In fact, median EBITDA levels hover over 10x for any deals over the $500 million mark—10.5x for transactions sized between $500 million and $1 billion and 11.2x for $1 billion to $2.5 billion.
Note: This column was previously published in The Lead Left.