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Fall 2014  |  Table of Contents
 

Pratt’s Stats Analysis Reveals Significant Trends

Recent analysis of 2013 data from Pratt’s Stats, the leading private M&A transaction database, reveals several notable trends.

Business values are on the rise: The median selling price-to-EBITDA ratio for all major sectors was 2.96x in 2013, up slightly from 2.88x in 2012, but down from a 10-year high of 6.16x in 2006. In 2013, the major sector with the greatest median selling price-to-EBITDA ratio was manufacturing, at 5.69x, and the sector with the lowest was retail trade, at 2.01x. The tech sector, which Pratt’s Stats classifies as a subsector under the major industry sector “services,” had a median selling price-to-EBITDA ratio of 12.98x in 2013.

Companies pay more: The median selling price-to-EBITDA ratio in 2013 for public companies acquiring private companies was 9.55x, significantly more than that of individuals buying companies, which was 2.78x.

Size does matter: The median selling price-to-EBITDA ratio in 2013 corresponds positively with firm size. When transactions are sorted by those with the largest revenues to those with the smallest and are then divided into five equal-sized quintiles, there is a general decline from 6.02x to 3.13x to 2.63x to 2.45x to 2.00x, respectively. This shows that companies with the highest net sales tend to have a larger median selling price-to-EBITDA ratio than the companies with lower net sales.

Stay tuned for more: As business intermediaries continue to submit deal information, additional data will be made available.

Pratt’s Stats contains transactions submitted by business intermediaries and M&A advisors where a person buys a private business, as well as transactions that have been researched at the U.S. Securities and Exchange Commission website where a public company buys a private business. Unless otherwise noted, this analysis contains all transactions.