The report highlights how these market multiples have compared with transaction multiples of publicly traded U.S. companies and with the distressed valuation multiples employed by Fitch for purposes of its recovery analysis. It also provides an analysis of the trend in the market equity cushion (EV multiple minus leverage multiple).
In conducting its analysis, Fitch made the following observations:
â¢ Current market valuation multiples (EV/EBITDA) across 14 of the 18 sectors in the U.S. dipped below 2010 levels after having trended upward for several consecutive quarters. The aggregate market multiple for all companies for the most recent LTM is down to 7.5 times (x) from 8.5x at the end of 2010.
â¢ Transaction multiples in 2011 have increased versus multiples seen in 2010, despite the decline in equity markets. Some notable M&A deals this quarter include the announced $18 billion purchase of Goodrich Corporation by United Technologies at a Fitch-estimated 12.8x EBITDA multiple and the announced $38 billion acquisition of El Paso Corp. by Kinder Morgan, Inc. at a Fitch-estimated 14.1x EBITDA.
â¢ Fitch employed multiples continue to hover either below or in the lowest quartile of 10-year historical public market multiples.