Higher interest rates, a sluggish exit environment, reduced distributions, and extended fundraising periods have created a challenging backdrop for private equity valuations. These factors have contributed to putting downward pressure on valuations.

Despite the headwinds facing private equity valuations, the current market presents compelling opportunities for discerning investors who can leverage granular data to identify undervalued assets. In a new report, we discuss trends and dispersion of the different valuation multiples and the opportunities that may exist for investors in private equity markets.

Some of our findings include:

• Opportunities in Dispersion: wide valuation ranges, like the 17.87-point interquartile range in EBITDA multiples observed in the Retail industry, indicate higher risk, and present significant opportunities.

• Peak Health? Despite being the most expensive sector based on unadjusted EBITDA multiples (24.12x), the Health industry exhibits strong sales growth, increasing profitability, and lower valuation dispersion. This combination suggests potential for continued growth and attractive investment prospects.

• The Tech Sector, although facing headwinds from high interest rates and potential downside risks due to front-running valuations, exhibits a wide dispersion in valuations which suggests opportunities for investors. The breadth of data available in privateMetrics allows this dispersion to be measured over time.

• The Importance of Revenue Models: Subscription-based businesses are attracting premium valuations. Reselling models, typically associated with lower margins and less pricing power, are garnering less investor enthusiasm, leading to lower valuations. privateMetrics includes indices and comparables that can capture these dimensions across thousands of assets.

Changes in EBITDA Multiples by PECCS® Industries – September 2024

Source: privateMetrics, as of 31/08/2024.

privateMetrics® provides access to market indices and comparables data to answer such questions, covering more than 1 million companies over 10 years across 150 countries. The data can be customised allowing for granular, yet robust comparisons.

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