Valuations rebound to near pre-crisis levels, putting pressure on sponsors

* Deal prices for companies are approaching nose-bleed levels

* Economy is strengthening, credit markets deepening

* Limited partners want money invested in timely fashion

Factoring in expected cost-savings, the deal pro forma would be priced at a more reasonable 13x EBITDA. Still, Zug called valuation inflation the biggest change in the buyout market he’s witnessed over the last five to 10 years. Very few of the direct buyout deals the firm considered last year, outside of a few located in Brazil, Russia and other “remote places,” had price tags under 10x EBITDA, he said.

“It’s unlikely we should expect the kind of returns we saw a decade ago,” Zug said at the March Buyouts East conference held in Boston. “We’ll be lucky if the top-quartile funds have a 15 percent (net) IRR.”

The full version of this article appears in the full summer edition of Connections in the Middle Market, published by the partnership of Buyouts Insider and global law firm Duane Morris. Download the edition at right.