Buyout Multiples and Deal Flow on the Rise: The Time to Sell?

According to PitchBook, 2011 came to a close with buyout multiples nearly matching 2008 levels. Coming in at 9.1x EBITDA, this marked a sharp increase from 7.3x EBITDA in 2010 and a continued rise for two straight years.

At the same time, a recent survey of fund managers found that an increased investment of capital is to be expected in 2012. According to the Perspective Private Equity Study by BDO, 22 percent of fund managers expect to invest between $30 million and $50 million in deals and acquisitions during 2012.

This is a significant increase, up from just 10 percent of respondents a year ago. And 16 percent of fund managers surveyed said they would deploy somewhere between $51 million and $100 million in capital over the coming year, an increase from only 11 percent last year.

The sharp rise in deployed capital, along with pre-recession EBITDA multiples in private equity is an excellent signal for those looking to sell a business in 2012. The combination of pricing and increased deal flow means now is the time for private equity candidates to prepare for sale.