GCG’s Q4 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 most industries but Q4 was not a positive quarter overall for all middle market sectors. More importantly, for the year, the middle-market index was up 2% compared to a 28.8% increase in the S&P 500. There were two sectors in the middle-market that outperformed the S&P 500, Industrials & Manufacturing and Business Services.
- 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 declined 15% over the past 12 months. Current multiples reflect strongly improving earnings as the economy continues to recover from the pandemic coupled with relatively flat stock prices in the middle-market. 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 Q4 2021 increased from Q3 and was the highest of the past 12 quarters by deal volume. Compared to Q3, values and volume increased 6.1% and 12.6%, respectively. On a year-over-year basis, Q4 2021 value and volume grew 39.3% and 38.3%, respectively.
- Q4 deal activity by sector was similar to Q4 2020 in terms of the sectors with the most market share. Consumer Discretionary was the dominant sector in middle market transactions announced and closed in Q4 2020. This was often the largest sector before the pandemic as well. It decreased to 15% in Q4 2021 and no longer has the highest percentage of deals, however. Industrials deals made up 21% of the activity in the 4th quarter followed by IT deals at 19%.
Click here for the full update.