Private equity firms are paying more for leveraged buyouts to keep pace with soaring valuations of acquisition targets, making some investors leery of whether the industry can keep delivering on promises of lucrative returns.
For example, buyout firms TPG Capital and TA Associates paid the equivalent of 16.5 times the annual earnings of Planview Inc when they acquired the U.S. work management software company in December for $1.6 billion from Thoma Bravo, another private equity firm. Thoma Bravo had paid 6.7 times the annual earnings of Planview when it first acquired it from Insight Partners for $800 million in 2017.
Private equity firms paid an average 13.2 times a company’s annual earnings before interest, tax, depreciation, and amortization (EBITDA) for U.S. leveraged buyouts in 2020, an all-time high, up from 12.9 times in 2019, according to financial data provider Refinitiv.
Reporting by Chibuike Oguh in New York; Additional reporting by Joshua Franklin in Boston; Editing by Greg Roumeliotis and David Gregorio
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