Mid-market private companies prove resilient: Golub index

Technology companies continue to outperform, with year-on-year growth of 37 percent, but the index shows strong numbers across all sectors.

The earnings of mid-market companies in the Golub Capital Altman Index grew by 16 percent in the first two months of Q4 2023, according to its Q4 2023 report. This is the largest growth in earnings recorded by the index since the second quarter of 2021. Meanwhile, revenues rose 7 percent year over year.

The index follows the revenues and earnings growth of approximately 110-150 US companies in Golub Capital’s loan portfolio. According to Lawrence Golub, chief executive officer of Golub Capital, the numbers show that “private equity-owned mid-market companies in general are proving resilient and adapting well to the environment”.

The GCAI, produced by Golub Capital in collaboration with credit expert Edward Altman, is the longest-running index based on EBITDA for mid-market companies.

Of the latest numbers, Altman said: “While Index results were strong across all subsectors, technology continued to outperform. The latest employment data shows that the labour market remains tight, and small- to medium-sized businesses face ongoing shortages of skilled labour. It is not surprising that mission-critical providers of productivity-enhancing enterprise software would benefit from these trends.”

The index tracks four sectors: technology, consumer, healthcare and industrials. While the year-on-year growth of earnings for technology was 37 percent, that of the slowest-growing sector, industrials, was 10.6 percent. The corresponding numbers for consumer and healthcare were respectively 13.8 percent and 11.4 percent.

The GCAI has only limited exposure to financials, utilities, or energy and materials. Accordingly, Golub compares the GCAI not only to the S&P 500 and S&P 600 but to “adjusted” versions of those indexes that exclude the aforementioned sectors. The adjusted comparisons, too, show a sizeable outperformance on the part of the GCAI in this quarter.