COTW: Disconnect Between PE Multiples & Return Expectations

Graph regarding PE Multiples & Expectations

COTW: Disconnect Between PE Multiples & Return Expectations

The chart below can be downloaded here.

 

Private equity valuations have recently jumped higher and at 10x enterprise value-to-EBITDA (EV/EBITDA) multiples are at/near the highest levels of this cycle. Historically, pricing at these levels has resulted in lower forward realized returns. We would side with the “no” camp in Pitchbook’s mid-year investor survey.