The European Lincoln Private Market Index Sees Slight Gain in Q1 2025, Only Because Earnings Growth Offset Multiple Contraction

Jun 2025

The European Lincoln Private Market Index (Lincoln PMI), the only index that measures changes in enterprise values of private companies, inched up just +0.5% in Q1 2025, its weakest quarter since Russia’s 2022 invasion of Ukraine. Earnings growth added +3.1%, but EBITDA multiple contraction had a negative impact of -2.6%, nearly erasing the gain.

Nick Baldwin, Managing Director in Lincoln International’s European Valuations & Opinions Group, noted, “While private market enterprise values tend to demonstrate greater stability compared to their public counterparts over the long term, during periods of heightened uncertainty, such as the first quarter of 2025, valuation multiples in private markets are still susceptible to fluctuations, reflecting trends observed in the public markets.”

By the numbers

• Since inception: Earnings have lifted the Lincoln PMI by an average +3.2% each quarter, while multiples shaved off -0.8% on average.
• This quarter: Multiple contraction was 3x worse than average, in percentage terms, echoing public market declines (e.g., STOXX 600 EV index, where the median multiple fell 2.1%).
• Earnings: Driven by top line growth, as indicated by the EBITDA margin in the Lincoln PMI falling from 23.4% to 22.8%, which may exacerbate tariff vulnerability.
• UK vs. Eurozone: UK companies in the Lincoln PMI rose +1.5%, whereas Eurozone companies in the Lincoln PMI fell by -0.2%. This could be driven by the sector bias given a greater portion of the private UK market is comprised of business service companies.
• Sector swing:
  • Industrials: The Lincoln PMI sub-index rose the fastest at +2.6%, despite historically sluggish growth.
  • Technology: Technology companies’ enterprise values fell -4.6%; it was the only sector to decline during Q1 2025.
• April flash look: Median EV / EBITDA fell by -0.3x, driving enterprise values down by -1.9% despite EBITDA growing +1.0%, as private markets were not insulated from fears of global tariff impacts.

 Between the lines

• EBITDA multiple compression of private companies directionally aligned with multiples of public companies but with less volatility given the long-term investment horizon of the sponsor-backed market.
• UK outperformance traces to heavier exposure to business services, an industry expected to be more insulated from global trade wars and which has benefitted from high cash flow conversion and therefore greater investor demand.

 Zoom in: Tariff turbulence

• “Liberation Day” tariffs (effective April 2) are already squeezing industrials multiples and have introduced volatility throughout Q2.
• Sponsors and lenders have incorporated macro shocks into their pricing; as a result, Lincoln initially widened its senior and unitranche spread assumptions by +25 bps for all deals. However, as trade talks commenced and the supply-demand imbalance in private markets increased given limited buyout activity, spreads tightened back to pre-“Liberation Day” levels.

What to watch

• Further tariff salvos could deepen multiple compression.
• Lenders’ risk appetite is tilting hard toward “A-plus” deals, leaving weaker credits exposed.

The bottom line: Earnings are still growing, but the multiples are beginning to fall faster, while tariffs plus higher spreads threaten to reduce growth even further. This marks a shift in private market drivers to multiples playing a larger role, aligning more with public market trends. Given pressure on EBITDA margins, tariff impacts may be exacerbated.

Steven Kaplan, Neubauer Distinguished Service Professor of Entrepreneurship and Finance at the University of Chicago Booth School of Business, commented, “For European exporters, shrinking margins could signal greater vulnerability, especially if tariff absorption intensifies, further threatening earnings growth as a key driver of private market performance.”