OREANDA-NEWS. In the 9th installment of the 'U.S. Leveraged Finance Multiple EV-aluator' Fitch Ratings provides an updated historical analysis of market (Enterprise Value/EBITDA) and transaction (Transaction Value/EBITDA) multiples across 18 sectors.

The report calculates and summarizes multiples for nearly 2,000 completed transactions since 2005. Also included are detailed sector and issuer level views of market multiples for 500 publicly-traded high-yield issuers.

The overall median transaction multiple through November 2015 YTD is 11.4x, down from 12.2x in 2014 due to a small number of low-multiple transactions in the Metals/Mining and Building/Materials sectors. Excluding these sectors (which make up 4% and 10% of the 2014 and 2015 sample, respectively) the November 2015 YTD median transaction multiple is 12.5x while the 2014 median transaction multiple remains unchanged. Our detailed breakdown by sector illustrates the considerable divergence in multiples across industries.

Despite this year's decline, the annual median transaction multiples in the last two years remain well above the historical 10-year median of 10.9x. Elevated transaction multiples remain supported by high equity prices and an active M&A market. Sector consolidations and strategic acquisitions have dominated the recent M&A scene as strategic buyers have paid higher multiples given their potentially greater ability to shed significant costs and realize revenue opportunities. At the same time, leveraged lending guidelines have limited multiples that financial sponsors are willing to pay while maintaining their return hurdles.

The healthcare and pharmaceuticals (H&P) sector provides a prime example of sector consolidation and strategic acquisitions driving up transaction multiples. The H&P median transaction multiple increased to 17.9x in 2015, up from 17.0x in 2014 and 15.7x in 2013. Companies in all subsets of the H&P sector are contending with secular shifts and have taken advantage of the favorable interest rate environment to better position themselves to face challenges and capture growth opportunities. Providers of acute and post-acute healthcare services have vertically integrated with companies operating in adjacent-care delivery settings, or have amassed scale through horizontal M&A. Specialty pharma companies have also been active acquirers, hoping to build out product pipelines and acquire newer, advanced technologies.

The observed market and transaction multiples across sectors form the analytical basis for our bespoke recovery analysis. Fitch employs distressed valuation multiples that hover below, or in the lowest quartile of, the 10-year historical public market multiples.