At A&M, we continue to follow the trends that are driving value in the private equity space. “Buy low, sell high” has always been a constant strategy platitude. But the challenge in today’s market is finding the right opportunity. Even more interesting is how emerging markets multiples, such as Latin America, continue to be lower than many other regions.
This PitchBook article breaks down three key value-driving sources that shouldn’t be ignored. Looking at smaller enterprise values, early-cycle investing and emerging markets is where firms should start.
"Buy low, sell high." It's one of the oldest platitudes in finance, but one that is especially relevant in today's PE landscape. Multiple expansion between entry and exit prices has long been known to be one of the main drivers of PE returns, particularly during times of economic expansion or growth. Indeed, median buyout multiples have hit 10.0x in 2017, more than four turns higher than the 5.6x recorded in 2009. To achieve multiple expansion, PE firms must begin with the first half of the adage: buy low.