Deal Multiples Rise in First Half of 2004 –

Lender generosity and the availability of capital continued to impact leveraged buyout multiples in the first half of 2004, as both debt and purchase price multiples increased from 2003.

For purchase price multiples, increases were seen across all deal-size categories. Deals over $500 million experienced the greatest gains, in terms of both hard numbers and percentages. The average large-market deal in the first half of 2004 was transacted at 8.02x EBITDA (non-adjusted pro forma trailing, inclusive of expenses and fees), as compared to a 7.28x EBITDA mark in Q4 2003. Mid-market deals, valued at between $250 million and $500 million, rose to 7.17x EBITDA, while deals under $250 million rose to 6.86x EBITDA, according to Standard & Poor’s Leveraged Commentary and Data.

While they didn’t rise as dramatically, debt multiples for highly leveraged loans also increased, from 4.2x EBITDA in the final quarter of 2003 to 4.5x EBITDA in Q1 2004 and 4.4x EBITDA in Q2 2004. The 4.5x EBITDA mark in Q1 also bested yearly averages from 2000 through 2003.

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