Tech Is 'on Fire' in Private Equity Market, Lincoln Int'l's Kahn Says

The video discusses the definition and performance of middle market companies, focusing on an index created with data from 1500 privately held companies. It highlights the growth of these companies compared to public counterparts, driven by performance rather than multiples. Sector analysis shows technology leading, while energy lags. Concerns about a private equity bubble are raised, with high purchase multiples and leverage noted. The market is currently a sellers market, with private equity firms looking to sell high-value assets. Valuation concerns include pro forma adjustments used to justify purchase prices.

What is one of the main challenges in valuing middle market companies?

• They have a high EBT.

• They have a low number of investors.

• They are publicly traded.

• They are closely held and often owned by private equity firms.

How does the growth of the private company index compare to the S&P over the last five years?

• The private company index grew by 6%, similar to the S&P.

• The private company index grew by 10%, outperforming the S&P.

• The private company index grew by 4%, underperforming the S&P.

• The private company index and the S&P both grew by 10%.

Which sector has consistently performed well according to the index?

• Technology

• Industrial

• Energy

• Automotive

What is a characteristic of the current private equity market?

• There is no significant market trend.

• It is a stagnant market.

• It is a seller's market.

• It is a buyer's market.

What is a common strategy used by private equity firms in the current market?

• Holding onto assets indefinitely.

• Using add-ons to blend multiples.

• Avoiding any new acquisitions.

• Selling assets at low multiples.

What is a pro forma adjustment typically used for?

• To decrease the company's valuation.

• To account for potential synergies or cost reductions.

• To increase the number of employees.

• To avoid reporting financial data.

What percentage of the 1500 portfolio companies have pro forma adjustments?

• 100%

• 75%

• 25%

• 50%