Private Asset Multiples Surpass Public Assets: Is This the New Normal?

For only the third time in the last three decades, average valuation multiples (the price paid per dollar of EBIDTA) for private assets have exceeded public asset multiples, according to a new report by Bain & Company. And while the prior two occurrences were short-lived, analysts predict something is different this time around.

In its lengthy analysis, the report points to a number of factors that have caused the pendulum to swing towards higher private asset valuations. While public assets have historically enjoyed a premium due to higher liquidity and transparency, the flood of new capital into the private markets (at double the rate of the public markets) combined with broadening access to private investments have quickly changed this dynamic. At the same time, IPOs have continued to lose their luster, as companies have opted to avoid the costs and hassle of going public in favor of tapping into an abundance of private equity and institutional capital. All of this, the report concludes, points to a lasting trend that will continue to drive interest in private market opportunities.

“We see fundamental shifts happening in capital markets that are likely to drive a long-term trend toward much larger private capital (and private equity) opportunities vs. traditional public equity models,” said Hugh MacArthur, Head of Global Private Equity at Bain & Company.

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