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Private Equity Valuation Post Covid: US & EU


Private Equity Multiples

The private equity industry has been significantly impacted by the COVID-19 pandemic. While the global economy is struggling to recover, private equity firms have had to adjust their investment strategies as they navigate through these unprecedented times. In this article, we will explore how private equity valuations have changed across Europe and the US in the past year and examine the trends in multiples over the last five years.


The Impact of COVID-19 on Private Equity Valuation


COVID-19 has brought about a significant change in the private equity valuation landscape. With companies experiencing declining revenues and economic uncertainty looming, private equity firms have had to adjust their valuation strategies. Private equity firms have shifted their focus to industries that are less affected by the pandemic, such as technology and healthcare. Additionally, many firms have looked to invest in distressed assets in an attempt to capitalize on the crisis.


Multiples Over the Last Five Years


To understand the impact of COVID-19 on private equity valuations, we must first examine the multiples over the last five years. The table below summarises the median EV/EBITDA multiples across various industries.

​Industry

2016

2017

2018

2019

2020

Healthcare

12.2

11.9

11.8

12.3

13.5

Technology

14.1

15.8

16.5

17.3

17.9

Consumer Goods

11.4

10.9

10.6

11.1

10.8

Energy

9.8

10.1

9.9

9.7

8.5

As we can see from the table, multiples have steadily increased in the healthcare and technology sectors. Meanwhile, the consumer goods and energy sectors have seen a decline in multiples over the last five years. However, it's important to note that the data only goes up until 2019, and the impact of COVID-19 on multiples remains to be seen.


Trends Since COVID-19


While it's too early to determine the full extent of the pandemic's impact on private equity valuations, there are already noticeable trends. According to a recent report by Bain & Company, private equity deal-making activity has slowed significantly, with only $252 billion worth of deals recorded in Q2 2020. This represents a 52% decrease from the same quarter in 2019. Additionally, valuations have decreased across most industries, except for certain sectors that have benefited from the pandemic, such as technology and healthcare.


Conclusion


In conclusion, COVID-19 has brought about significant changes in private equity valuations across Europe and the US. While the full extent of the impact is still being assessed, private equity firms have had to adjust their investment strategies to remain competitive. As we continue to navigate through these unprecedented times, the private equity industry will undoubtedly face further challenges and opportunities.


Sources:


  • Bain & Company "Global Private Equity Report 2021"

  • PitchBook "Q2 2020 Private Equity Valuations & Multiples Report"

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