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Back to blog November 04, 2021 No Comments Author: Andy Jones

Private Equity – Acquisition Criteria Metrics 2021

We have previously reported that private equity, as an industry, is moving down market, increasingly investing in smaller deals.

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While the migration down market was a trend, this seems to have stabilized, with little change in the last three years. That said, with the previous push down market, there’s now a long tail to the distribution of companies of interest to private equity firms.

So, how small of a company will PE firms still consider for a platform investment?

The Data

Using data compiled from www.PrivateEquityInfo.com, the charts below show the minimum platform acquisition criteria metrics for private equity firms (min revenue, min EBITDA, min enterprise value, min equity).

To be clear, this data is not based on transaction comps, but on the stated desired range for platform acquisitions. (Note: we only record the size preferences for platform investments because there are often no minimums for add-on investments).

Minimum Revenue

  • 62% of PE firms will look at deals with revenue as low as $10 million as a platform investment.
  • 95% of PE firms will look at deals with revenue as low as $50 million as a platform investment.

Minimum EBITDA

  • 72% of PE firms will look at deals with EBITDA as low as $3 million as a platform investment.
  • 92% of PE firms will look at deals with EBITDA as low as $5 million as a platform investment.

Minimum Enterprise Value

  • 61% of PE firms will look at deals with Enterprise Values as low as $25 million as a platform investment.
  • 94% of PE firms will look at deals with Enterprise Values as low as $100 million as a platform investment.

Minimum Equity

  • 65% of PE firms will write an equity check for as low as $10 million for a platform investment.
  • 80% of PE firms will write an equity check for as low as $20 million for a platform investment.

Capital Structure

Also, of notable interest is the MEDIAN of the ratio (min equity) / (min EV) = 0.5.

Interpretation – this is a proxy for the percentage of equity PE firms now place into their capital structure upon initial acquisition of a new platform company. Although this is an inexact science, current PE deal structures appear to corroborate with this approximate ratio.

Subscribe to www.PrivateEquityInfo.com to filter PE firms by their target financials and other acquisition criteria.