While the worldwide market for private equity M&A transactions expanded in 2024, buyers are enjoying attractive deal terms even as deal activity remains well below the 2021 boom year.
The median price-to-earnings multiple for global PE buyouts fell to 11.1x in 2024, tying the lowest figure since 2016, according to an analysis by SS&C Intralinks, using data from PitchBook.
At the same time, the median buyout size was approximately $100 million (U.S.) — the highest ever recorded, including 2021. “Reconciling that with a semi-diminished multiple, it is clear PE buyers are still expending significant sums but for better terms and pricing,” said SS&C Intralinks, a provider of virtual data room technology for M&A, alternative investments and capital markets professionals.
The better pricing enables PE firms to target larger enterprises or assets, such as divisions of troubled publicly held companies, according to the report.
Even add-ons — where a PE firm purchases a smaller company and merges it with an existing portfolio company — trended at the “robust” median acquisition price of about $40 million, SS&C noted. In fact, in 2024 add-ons accounted for a greater proportion of overall private equity deal value than ever before.
“As more PE firms have expanded their investing scope into smaller niches of middle-market company ecosystems across the globe, the median add-on size has been counterbalanced by competition for the best targets,” the report said.
SS&C argued that the low pricing trend doesn’t mean the PE deal market is in an unhealthy state. Since early 2023, the report states, total deal values worldwide have roughly averaged between $320 billion and $350 billion per quarter, “which still outstrips nearly all pre-2021 figures.”
Although the number of deals has fallen since 1921, “such a decline is likely after any bullish period,” SS&C said.
Pricing multiples had been elevated for several years until 2024, when they finally declined, in large part because equity components of deals compressed significantly, the report noted.
For PE sellers, 2024 offered a “small green shoot,” as the average exit size climbed to nearly $780 million after a two-year slump. And even the median is holding steady at $230 million, “which is elevated relative to historical tallies,” SS&C said.
Still, exits continue to be challenging, with quarterly counts having declined since the middle of 2023 along with the drop in deal values. Liquidity pressures have contributed substantially to the increasing usage of creative solutions like continuation funds and secondary sales, according to the report.
