News & Analysis

Survey: Mid-market businesses post middling results in Q3

A new study showed that companies across five key sectors, on average, did not post explosive growth or significant drops in EBITDA.

-

Mid-market private companies’ year-over-year EBITDA remained basically unchanged as revenues rose in the third quarter, though at a slower pace than the same time last year, according to a report by Golub Capital and credit market expert Edward Altman.

The New York-based firm and the New York University professor of finance said in a report issued Friday that revenues rose by 4.6 percent as EBITDA from the third quarter 2015 declined by 0.7 percent over the same period. Those figures compare to second-quarter year-over-year receipts increases of 7.4 percent, and 2 percent in EBITDA.  

“While the companies in the middle market are profitable, this is the first quarter since we began tracking this data in 2012 that EBITDA was essentially flat on a year-over-year basis,” Altman said in the report. 

All five key sectors outlined in the report saw an increase in revenues. Consumer discretionary along with IT were the two sectors that saw an increase in EBITDA, whereas consumer staples, industrials and healthcare saw decreases that same figure drop. 

Information technology was the strongest sector, in which those mid-market businesses increased revenues by almost 10 percent and EBITDA by almost 2 percent. Healthcare companies performed the worst, posting an almost 3.7 percent increase and an 8 percent drop, respectively.  

In the report, Golub Capital CEO Lawrence Golub (pictured) attributed the strong IT sector performance to productivity gains stemming from the adoption of cloud-based software and contribution to job growth. He cited the need for software engineers and sales representatives as examples.  

Haggling over prices has led to downward pressure on some healthcare companies’ profits, Golub explained in a follow-up inquiry. 

“In healthcare, margin compression is most pronounced in businesses that are subject to rate negotiations with insurance companies and other payors,” he said in an email through a spokeswoman. “This will continue, and the healthcare businesses that will be most successful will be the ones that increase labour productivity through process improvements and change management.”