Costly Capital

GF Data’s findings reveal a growing dichotomy across deals and the impact of changing dynamics in the debt market

The stage was set coming out of 2022 for disruptions in middle-market private equity financing, and the first quarter delivered.

Meanwhile, a 1% increase in average fees on subordinated debt and smaller increases in average coupon and payment-in-kind notes pushed all-in pricing to 16.8%, up 2% from the average for all of 2022.

Despite this, GF Data recorded an average purchase-price multiple across all transactions of 8.1x trailing 12 months (TTM) EBITDA for all reported deals with total enterprise values between $10 million and $500 million. That was well above the 6.9x average recorded in the fourth quarter of 2022 and close to that year's third quarter average.

But it was really a tale of two markets and, depending on where you looked, it was the best of times or the worst of times.

BOB DUNN Managing Director, GF Data

After a modest rise in the cost of capital at the end of 2022, average pricing on senior debt tracked by ACG’s GF Data shot to 8.1%—a marked jump from the 6.9% average recorded in the fourth quarter. That’s also the highest interest rate on senior debt GF Data has seen since early 2007.

On the positive side we noted a rather large group of platform deals valued between $10 million and $50 million with an average purchase price multiple of just over 12x.

At the other end, we saw a noteworthy number of manufacturing and distribution businesses valued between $50 million and