One would assume that with the sentiment out there about interest rates going up, multiples would come down. Interestingly, enough of this expectation that held true in the past does not hold true, at least for now. It appears that by solving the increased interest payment issue by over equitizing their investments, it thereby leaves their cash flows the same.
This is an interesting trend as it would be interesting to understand how this approach will impact exit IRRs. Stay tuned.
Despite nine interest rate hikes since December 2015, US PE EV/EBITDA buyout multiples have remained remarkably steady...The change was most felt in equity contributions, which increased from 4.8x to 5.7x and have accounted for the overall increase.