GCG’s Q3 2021 Middle Market Update provides an overview of the latest trends in the market, including the recent performance of select sectors and the state of the middle market M&A environment.
Key findings include the following:
- GCG’s proprietary middle market industry sector performance index has continued to show positive results in all industries as the market continues to recover from the pandemic. Industrials, Technology, and Business Services led all industries with each recording annual returns over 60%. This compares to the S&P 500 index annual return of approximately 38%.
- GCG’s small cap public company index revenue and EBITDA multiples increased 38% between October 2020 and March 2021, but have been declining since their peak in March 2021, giving back most of their earlier increases. As a result, EBITDA multiples have had an overall growth of 10% over the past 12 months. Current multiples reflect strongly improving earnings as the economy continues to recover from the pandemic. As earnings continue to escalate, we anticipate that multiples will continue to level out at a slightly lower level than the most recent 6 months.
- Middle market public and private company transaction deal value and volume for Q3 2021 took a slight decline from Q2 which was the highest of the past 11 quarters. Compared to Q2, values and volume declined 8% and 5%, respectively. On a year-over-year basis, Q3 2021 value and volume grew 63% and 54%, respectively. The 4th quarter of 2021 should eclipse both Q2 and Q3 as year-end deal closings will be significant due to anticipated tax changes.
- Q3 deal activity by sector was similar to Q3 2020 in terms of the sectors with the most market share. Healthcare was the dominant sector in Q3 2020 (as it was the dominant sector during the pandemic) at 18% of middle market transactions, followed by IT, Industrials, and Consumer Discretionary. In Q3 2021, Consumer Discretionary deals were the dominant sector and made up 19% of the activity, followed by IT deals at 17% and Healthcare at 15%.
Click here for the full update.