MARKETS & INVESTING | Staff Reporter, Korea

Median deal multiples for PE-backed M&As set a new record in 2018: report

Deals focused on restructuring, carve-outs and turnarounds rose in value to more than triple the previous five-year average.

The median earnings before interest, tax, depreciation and amortisation (EBITDA) multiples on Asia-Pacific private-equity (PE)-backed mergers and acquisitions (M&A) transactions in 2018 set a new high after rising to 14.5 from 2017’s 12.9, according to Bain & Company’s 2019 Asia-Pacific Private Equity report

Although growth equity deals captured the headlines, deals that focused on restructuring, carve-outs and turnarounds rose in value to more than triple the previous five-year average, led primarily by South Korea.

According to the report, transactions with two or more investors reached a new high in 2018, helping PE firms tap into ever-larger deals. The number of deals involving multiple investors rose to 71%, compared with an average 56% over the past five years, and a growing number include five or more investors.

“In PE transactions worth $500m or more, almost 80% involved multiple investors,” the report’s authors added. “The average number of investors per deal in the Asia-Pacific region in 2018 was 3.3, up from 1.7 in 2013.”

Meanwhile, a few trends were observed to have driven private equity investment across the region, including greater overall acceptance of private equity and a shortfall of managers able to help companies achieve the next phase of growth. “Company owners increasingly recognize that global general partners (GPs) bring a network and capabilities that local and regional corporate investors can’t match,” the authors explained.

Private equity investors are reportedly choosing from a broader pool of companies across the region, thanks in part to secondary deals, or exits where the sale is to another PE owner, the report noted. Secondary deals represented 10% of total deal value in 2018 and are likely to continue rising. However, this is still well below the levels seen in the US or in Europe, which averaged, respectively, 17% and 53% of the market value in the past five years.

Moreover, the report highlighted that most funds have a significant overhang of capital, enabling them to make investments. Committed but unspent capital, also known as dry powder, set a new record in APAC after rising to $317b by end-2018, or three years of future supply at the current pace of investment, from $267 billion in 2017.

“Sustained past fund-raising activity contributed to the surge, along with Preqin’s improved coverage of China funds,” the authors added. 

Do you know more about this story? Contact us anonymously through this link.

Click here to learn about advertising, content sponsorship, events & rountables, custom media solutions, whitepaper writing, sales leads or eDM opportunities with us.

To get a media kit and information on advertising or sponsoring click here.