MIDDLE MARKET
Database
Q1 2020 | COVID-19 Edition
Valuations & Opinions Group
Inside this Issue
With leverage covenant testing and expected declines in performance on the horizon, Q2 2020 will be a true test of company performance.
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Inside this Issue
Lincoln International observes declines in enterprise values and private credit instruments in the first quarter of 2020 with no safe haven industry.
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Enterprise Value Multiple Evolution
EV multiples declined on average by 0.7x in Q1 2020 and have reverted near Q4 2018 levels.
Additionally, the allocation of EV multiples in Q1 2020 shifted downwards, further approximating Q4 2018 levels.
Despite a decline in multiples, cash flow rich industries such as Business Services, Healthcare, and Technology have sustained EV multiples above their long-term historical averages, whereas Consumer and Energy multiples contracted below their long-term historical averages.
Note: Enterprise value as estimated by Lincoln; darker colors represent average leverage multiple, while lighter colors represent average enterprise value multiple
A closure of stores and an uncertain outlook in the Restaurant & Retail sub-industry drove an average 2.0x EV multiple decline for companies in this space, causing much of the observed contraction in Consumer EV multiples.
In Q1 2020, Business Services EV multiples were weighed down by a drag in Financial Institutions and Information Services. Healthcare multiples remained resilient due to stability in Products and Services. All while Technology multiple declines were muted with strong Software and Telecom EV multiple levels, despite out of favor movements in Media.
Note: Select sub-industries within the identified industry groups