Middle-market private companies in the Golub Capital Altman Index grew earnings by 16% during the first two months of Q4/23, marking the highest year-over-year earnings growth since Q2/21. Revenue for middle-market private companies grew 7% during the same period.
“We expected to see strong growth in Q4 2023 and the data exceeded even our expectations,” Lawrence E. Golub, CEO of Golub Capital, said, “As we said throughout 2023, private equity-owned middle-market companies in general are proving resilient and adapting well to the environment. Our middle-market report has also performed well. Every quarter in 2023, our data provided consistently correct early insight that economic growth was exceeding the prevailing consensus. The strong revenue and earnings growth of the Golub Capital Altman Index in Q4 2023, in our view, caps off a year that bodes well for investors in private equity. Despite concern about the potential impact of high interest rates and economic uncertainty on the returns of recent private equity fund vintages, fundamental earnings growth gives investors a reason for cautious optimism.”
“The Golub Capital Altman Index for Q4 2023 shows that the middle market is in robust shape,” credit expert Dr. Edward I. Altman said. “Quarterly EBITDA growth of 16.3% year-over-year was the highest in the eight-year history of the index, apart from the anomalous rebound from 2020 COVID shutdowns in Q2 2021. While Index results were strong across all subsectors, technology continued to outperform. The latest employment data shows that the labor market remains tight, and small- to medium-sized businesses face ongoing shortages of skilled labor. It is not surprising that mission-critical providers of productivity-enhancing enterprise software would benefit from these trends. Our middle-market firm indexes, especially the growth rate of aggregate and sectoral EBITDA, have proven to be excellent predictors of overall GDP and larger firm growth in 2023 and we expect these indexes of primarily private equity-owned firms, diversified across several industrial sectors, bodes well for 2024.”
The Golub Capital Altman Index, which is produced by Golub Capital in collaboration with Altman, is an index based on actual revenue and earnings (defined as earnings before interest, taxes, depreciation and amortization, or EBITDA) for middle-market companies. It measures the median revenue and earnings growth of approximately 110 to 150 private U.S. companies in the loan portfolio of Golub Capital.