Seller financing and earnouts (SFE) influence control premiums

BVWireIssue #106-1
BVWireIssue #106-1
July 1, 2011

In middle-market M&A transactions there are significant and consistent premiums in valuation multiples of transactions that did not include SFE's, reports Andy Greenberg (GF Data) in a recent Private Equity Professional Digest (subscription required). SFE's are used more frequently in smaller transactions and in years when deal flow is reduced. 

GF Data, which collects lower-middle market transaction information from over 175 contributing PE firms, will be providing metrics on SFE's along with valuation, leverage, and key deal term data when they release their Q2 report. The Q1 report showed "the size premium in private equity-sponsored middle market deals had never been wider than in the first quarter of 2011," according to Greenberg. For more information on GF Data contact Bob Wegbreit.

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