GCG’s Q4 2022 Business Services Industry Update provides an overview of the latest trends in the sector, including recent performance, valuation multiples, and the state of the middle-market M&A environment.
Key findings include the following:
- In Q4 2022, public equities across the majority of the Business Services sector saw relatively strong gains compared to the broader U.S. equity market. The sector continues to be fueled by strong demand for the critical service or maintenance requirements many companies operating in the sector provide, which has also been driving a tremendous amount of interest from private equity investment.
- On a 3-year period ending December 31, the S&P 500 has returned 18.2%. Sectors such as Infrastructure Services, Environmental & Waste Services, Residential, Commercial, & Industrial Services, and HR/Staffing have outpaced the S&P 500, returning 87.6%, 41.1%, 30.4%, and 21.1%, respectively.
- The volume of M&A activity in the Business Services sector saw an overall decline in Q4 2022, with 127 deals closed, versus 164 during the prior quarter, but the average deal value increased, growing 41.9% over the prior quarter.
- Trading multiples varied significantly across and within the six categories, with the strongest multiples observed in the Residential, Commercial, and Industrial Services categories with an average EBITDA multiple of 15.3x.
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