State of the Market

THe WSJ PE Analyst has an interview with a fund manager of Riverside Partners, a middle market buyout firm. They had this to say about the current state of the market:

The fund will continue its strategy, investing in small North American-based companies with earnings before interest, taxes, depreciation and amortization of $5 million to $15 million. Since August, the firm’s pipeline “sort of evaporated,” Kohl said. “We had about half a dozen deals that died during that period.”

As for lending, Riverside could borrow four to five times Ebitda, or as much as 75% of the purchase price at its peak; today, the firm caps out at three times to 3.5 times, or not more than 50% or 60% of the deal price, Kohl said.

“Another cruel fact is that we’re paying 300 basis points more for debt,” he said. “We’re borrowing less and paying more; that’s a bad formula. The good news is that we’re purchasing at a lower multiple.”