The Midstream Multiples

A significant portion of our business is due diligence in connection with mergers, acquisitions, and financing in the refining, petrochemical, and gas midstream industries. As part of this service, we offer clients our analysis of the historical multiples of earnings paid for midstream asset packages in the marketplace. While historical earnings multiples are not indicative of the present or future value of specific midstream assets, they may be used as a rule of thumb gauge to check fair market values estimated using discounted cash flow methods. Getting the multiple “right” can be as much art as science, but midstream assets go in and out of fashion, so there are discernible trends that may signal the direction of the broader market.

David Roussel presented the seminal work in this area at the 1999 Annual Convention of the Gas Processors Association in a paper entitled “The Rush for Mid-Stream Assets Goes On” covering reported transactions during 1994 through 1998.

We have expanded on Mr. Roussel’s work and brought the database up to date with the latest available transactions. The Midstream Multiples chart depicts the results, showing reported transaction values in terms of the multiple of EBITDA (earnings before interest, taxes, depreciation, and amortization). Be advised that the plotted points are not all “apples and apples.” Some are based on trailing twelve months’ earnings while others use projected year 1 pro forma earnings. If you are interested in the transactions behind specific data points, please contact us.

You can also read our periodic analyses of the Midstream Multiples in Barnes & Click Solutions:

Cash Flow Multiples: Midstream Transactions 1994-2000 (Jan. 2001)
Midstream Multiple Redux (Sep. 2003)
Whither Go Midstream Asset Values (Sep. 2005)