New research by CEPRES of $12 trillion of PE deals
Highlights disparity in pricing between NA and European buyouts

CEPRES released research this week showing recently the US buyout market is driven by revenue growth, whereas Europe is driven rather by operating income. The research used the CEPRES PE.Analyzer investment decision platform to analyze over $12 trillion of PE transactions to illustrate the disparity of buyout deal pricing drivers between North America and Europe and the higher end of the market versus the lower. The analysis shows US Buyout/Growth deals in the top quartile are priced with the highest premium paid for revenue since 1999, while EBITDA multiples are steady. Conversely in Europe, top quartile Buyout/Growth deals are paying a premium for operating income reflected in higher than normal EBITDA multiples, while revenue multiples are steady.

US EBITDA Multiples have remained stable for top quartile priced deals and deals below top quartile valuation have seen pricing pressure in recent years. Conversely, as shown in the attached chart, US valuations based on Revenue Multiples show substantial expansion for the top quartile in recent years and have surpassed prior peak revenue multiples seen in 1999. Deal valuations in Europe have experienced more volatility in recent years compared to the US market. Top quartile European deals continue to see sharp multiple expansion on an EBITDA basis while the lower 75% have remained relatively stable. Investors in European companies are less willing to pay high premiums for revenue growth and European deal multiples on a revenue basis have deteriorated since peaking in 2014. Investors targeting Europe are placing heavier emphasis on profits which is driving up EV/EBITDA valuations at top quartile European Buyout/Growth investments, while the investors in US companies are paying the highest multiples since 1999 for top quartile revenue growth deals.