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Private equity multiples over time

The last four years have seen an increase in private equity market multiples on the continent. Over the 2009 to 2013 period, more than half of PE transactions took place at lower than a 6x multiple. In 2014 and 2015 however, less than a third of PE transactions took place at that level.

Over 30% of reported PE transactions in 2014 and 2015 took place at greater than a 10x multiple, while this was less than 20% of cases in the earlier periods. In contrast, the EV/EBITDA multiples of listed equity on the continent have remained relatively flat over the 2013 – 2015 period, with a slight decline from 2014 levels.

Of the transactions with reported Enterprise Value, just over half of companies entered by PE funds in the 2009 to 2015 period reflected a Net Debt position on their balance sheets. The average Debt/EBITDA position of these companieswas 1.82x over the period, which drops down to 1.65x if 2010 is excluded.

2015 is an exception to the norm, as the value of all PE transactions trended  upwards, those with debt declined marginally. These fluctuations do appear from time to time and for a number of different reasons. The stable level of debt indicates that the private equity industry in Africa is still not debt driven, and the majority of fluctuation in multiples relates to the
availability and willingness of investors to put equity on the table.

This is quite a stark contrast to the situation in the United States, where the equity gap has remained within a range of 3.6x to 4.6x over the entire period. The multiples paid for PE transactions in the US market are therefore much more highly debt driven, and fluctuate with the availability of debt in the market.

 

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