US buyout multiples soar during coronavirus – report

A spike in US buyout multiples was driven by opportunistic investing and certain sectors experiencing a 'sugar-rush' of sudden demand, according to PwC.

US buyout multiples have risen to eye-watering levels during the pandemic as managers flock to hot sectors.

Assets commanded a 15.2x enterprise multiple during Q2 2020, up from 12.9x in the previous quarter and 11.5x for the same period last year, according to PwC’s US private equity deals insights: Mid-year 2020, published last week.

The pricing spike was driven by opportunistic investing and certain sectors – such as technology, media and telecommunications – experiencing a “sugar-rush” of sudden demand, the report said.

In terms of all M&A (including private equity) there were seven mega-deals above $2.5 billion in the first half of 2020, including the $22 billion merger of HR software businesses Kronos and Ultimate Software, both of which are owned by US buyout firm Hellman & Friedman.

Dealmakers invested $327 billion across 2,173 transactions during H1 2020, of which only 783 came in the second quarter. This is compared with $404.7 billion invested over 2,697 deals in the first half of 2019.

“The low level of activity will likely persist during Q3, reflecting the short-term pause,” the report added. “New deals emerging during the recovery probably may not close until Q4.”

In fundraising, firms closed on $241 billion between January and June, a marginal increase from $233.7 billion during the same period last year and the highest first-half total since 2017, according to PEI data. Of this, $87.3 billion was dedicated to the US.