By deal size
There is a clear relationship between the size of the transaction and the size of the EV/ EBITDA multiple used to price the investment.
Higher priced transactions tend to take place at the larger end of the spectrum. In this case the category of companies with Enterprise Value greater than USD 250m are attracting multiples of almost 8x.
The size of investee companies is largely determined by the Fund’s investment approach and fund size.
On the other end of the spectrum, the median multiple for small transactions (under USD 25m) is around 6x.
Larger funds will target larger-sized companies with established market positions. Funds may also strategically target larger, later-stage companies with stable and sustainable cash flows, particularly during uncertain economic times.
The debt level in African private equity increases marginally with deal size but doesn’t exceed 2x debt/EBITDA. Compared to the global norm, where debt/EBITDA increases more rapidly and to a far higher level as company size increases.