GF Data Resources has released its second quarter 2010 report based on activity from 154 private equity firms. The data indicates that the number of transactions is up but when looking at the multiples paid at closing, they have declined. GF Data reports that transaction volume grew by over 70% from this time a year ago. In addition, Q2 transactions grew 60% from Q1. iMerge Advisors, has experienced similar results in which quality companies with continued growth over 2009, whose owners are now comfortable with the lower valuations from the peak in 2006, continue to enter the market.
The GF Data report indicates that the average for all deals has come down from 6.7x to 5.6x for the same period in 2009. Companies with Ebitda between $10-$25 million yielded an average multiple of 4.8x. Companies with Ebitda between $25-$100 million saw an average multiple of 6.3x. For Internet and technology companies with Ebitda less than $5 million iMerge Advisors reports an average multiple of 3.7x and those under $1 million in Ebitda, multiples averaged 2.875x.
For those quality Internet businesses we anticipate multiples to remain stable while not increasing significantly over the next several quarters.