2018 was a Massive Year for Buyouts

2018 was lots of things to lots of people.  Some may remember the year as the year America gained back respect from China by addressing its unfair trade practices.  Others may focus on the terrible fires in California.  Others may wish to focus on the positive, such as the amazing PyeongChang Winter Olympics.  Still others may remember 2018 as the year stocks failed to deliver a Santa Claus rally. 

Lots of other things happened in 2018.  One them – a massive year for private equity buyouts – is addressed here. 

If you had to guess which year was the best year for buyouts ever, would you guess 2018 could be on top?  Perhaps 2000, just before the dot.com bust? 

Here’s a look at buyout activity since 2008.  On top is this year, 2018, with more than $700 billion in deal activity.  That places 2018 second all-time according to data from private equity data provider Pitchbook, surpassed only by the massive 2007. 

2018 was also the highest deal count ever, with an estimated 4,828 deal counts.  This expansion is certainly kicking on all cylinders (or at least most cylinders).

The Pitchbook report, available here, also has many other interesting tidbits of information.  Let’s see if you can guess how 2018 compares to the past 10 years on the following questions.

First question – How do the multiples experienced in 2018 compare to prior years?  Would you guess deal multiples are the highest they’ve been in the past decade?  Or perhaps you’d guess things have cooled somewhat compared to the recession and recovery years of 2008 to 2014? 

The look follows. 

Fascinatingly, 2018 was fairly good for Equity per EBITDA, debt per EBITDA, and EV per EBITDA, but not the highest since 2008. 

The winner for the highest debt per EBITDA is 2013 at a 7.1x multiple.  The winner for the highest equity per EBITDA is 2017 at 5.8x.  And the overall winner for the highest EV per EBITDA was 2014 with an EV per EBITDA at 12.4x.  Interesting, interesting.

Let’s take a look at one other measure and see how well you know 2018 compared to the past decade.

According to Pitchbook, what percentage of deals would you guess were done in 2018 that had multiples above 10x?  Would you guess 2018 had a higher percentage of deals above 10x than ever before?  Below is the look.

Captivatingly, more deals were priced above 10x in 2018 than ever before.  Incredibly, over 60% of deals in 2018 had valuations over 10x.  The next closest year?  2017 saw about 55% of deals with valuations at or above 10x.

 

Conclusion

In a fascinating look at private equity deal making and deal values in 2018, the year looks quite favorable to activity in the past decade.  It’s a good time to be employed or be involved in the private equity sector.