Private company enterprise values grew at their second slowest rate since inception, as lower multiples largely offset EBITDA growth

(NOTE: The Lincoln PMI, STOXX 600, and FTSE 250 EV returns above reflect enterprise values)
(Index EVs exclude financial institutions and real estate for which enterprise value is generally not meaningful; however, including such companies produces similar results)

Examining the Lincoln PMI

EBITDA Multiples versus Earnings

Private markets, while resilient, are not immune to broader economic pressures. This is reflected in the the Lincoln PMI, where the negative impact of valuation multiples signals a cautious “risk-off” approach by investors, with dealmaking focused on a limited number of high-quality transactions. A similar trend was evident in Q2 2022, when contraction in multiples fully offset the positive influence of earnings growth.

In Q1 2025, earnings growth remained the dominant driver of the Lincoln PMI, despite increasing pressure from declining EBITDA margins, which fell from 23.4% in Q4 2024 to 22.8% in Q1 2025. 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.”

SECTOR BREAKDOWN:

Comparing the UK and the Eurozone

European Lincoln PMI by sector

LOOKING AHEAD:

Rising Uncertainty

Following discussions with lenders and sponsors after 2 April, Lincoln initially increased spread assumptions on senior and unitranche debt by 25 basis points at the upper end of ranges for all companies, reflecting the market’s immediate reaction to tariff uncertainty. However, as trade discussions progressed and market participants settled into a macroeconomically uncertain environment Lincoln reversed the spread widening. While tariff exposure remains limited for some, increased U.S. recession risks are expected to have a knock-on effect in European companies’ performance and therefore loan pricing. Deal leverage is projected to stay stable, with pricing adjustments drawing most investor attention. As Lincoln regularly performs valuations on weekly and monthly bases, Lincoln already has insight into Q2 trends. Median EV/ LTM EBITDA fell by -0.3x in April 2025, with Industrials and Consumer sectors experiencing the greatest pressure due to tariff impacts. While average EBITDA rose by 1.0%, enterprise values fell by 1.9%, driven by multiple contraction stemming from growing uncertainty.

KEY INSIGHTS FROM LINCOLN

Private credit returns in Europe have outperformed the broadly syndicated loan market (“ELLI”) in Q1 2025. The European Senior Debt Index (“ESDI”) delivered a 2.7% quarterly return, versus a 1.0% return for ELLI, with a 49-basis-point boost from portfolio performance and spread tightening driving this increase. Despite this, the proportion of companies showing EBITDA growth fell to 70.6%, though this still exceeded the long-term average of 67.6%. EBITDA growth hit a three-year high at 9.3%, reflecting strong fundamentals, but smaller companies saw minimal growth at 0.2% while covenant defaults and holidays rose to 3.8%. These trends underline market preference for top-tier “A+” deals, as less robust companies remain vulnerable to external risks.

Summary

Academic Advisors

Professor Steven Kaplan

Professor Steven Kaplan is a Senior Advisor to Lincoln’s Valuations and Opinions Group. He is the Neubauer Family Distinguished Service Professor of Entrepreneurship and Finance and Kessenich E.P. Faculty Director at the Polsky Center for Entrepreneurship and Innovation at the University of Chicago Booth School of Business. Among other courses, Professor Kaplan teaches advanced Master of Business Administration and executive courses in entrepreneurial finance and private equity, corporate finance, corporate governance and wealth management. Professor Kaplan conducts research on a wide array of issues in private equity, venture capital, corporate governance, boards of directors, mergers and acquisitions and corporate finance. He has been a member of the Chicago Booth faculty since 1988.

Professor Kaplan serves on the board of Morningstar and several fund and company advisory boards. He is also a Research Associate at the National Bureau of Economic Research.

Professor Kaplan received a Bachelor of Arts, summa cum laude, in applied mathematics and economics from Harvard College and earned a Doctor of Philosophy in business economics from Harvard University.

Professor Michael Minnis

Professor Michael Minnis is a Senior Advisor to Lincoln’s Valuations and Opinions Group. He is the Deputy Dean for Faculty and Fuji Bank and Heller Professor of Accounting at the University of Chicago Booth School of Business, where he researches the role of accounting information in allocating investment efficiently by both managers and capital providers. His recent research focuses on understanding the role of privately held companies in the U.S. economy and how these firms use financial reporting to access, deploy and manage capital. He particularly enjoys identifying unique data and methods to empirically examine issues in a novel way.

In January 2018, Professor Minnis became a member of the Private Company Council, the primary advisory council to the Financial Accounting Standards Board (FASB) on private company issues. Professor Minnis received his Ph.D. from the University of Michigan and his B.S. from the University of Illinois, where he graduated with Highest Honors.

Methodology

The Index is calculated using anonymized data on an aggregated basis by Lincoln’s Valuations & Opinions Group, which has unique insights into the financial performance of thousands of portfolio investments across a variety of investment vehicles, including private equity and private debt funds. All figures are quoted in and based on calculations in local currencies, however Lincoln also prepares the index on a singlecurrency basis to account for FX impacts. Lincoln applied the same methodology to public indices to allow a like-for-like Enterprise Value comparison between the Index, the FTSE 250, and the STOXX 600.

IMPORTANT DISCLOSURE: The Lincoln Private Market Index is an informational indicator only, and does not constitute investment advice or an offer to sell or a solicitation to buy any security. It is not possible to directly invest in the Lincoln Private Market Index. Some of the statements above contain opinions based upon certain assumptions regarding the data used to create the Lincoln Private Market Index, and these opinions and assumptions may prove incorrect. Actual results could vary materially from those implied or expressed in such statements for any reason. The Lincoln Private Market Index has been created on the basis of information provided by third-party sources that are believed to be reliable, but Lincoln International has not conducted an independent verification of such information. Lincoln International makes no warranty or representation as to the accuracy or completeness of such third-party information.

The LPMI should not be construed as an offer to sell or buy, or a solicitation to sell or buy, any products linked to the performance of the LPMI. The use of the LPMI in any manner, including for benchmarking purposes, is not endorsed or recommended by Lincoln International and Lincoln International is not responsible for any use made of the LPMI. Lincoln International does not guarantee the accuracy and/or completeness of the LPMI and Lincoln International shall not have any liability for any errors or omissions therein. None of Lincoln International, any of its affiliates or subsidiaries, nor any of its directors, officers, employees, representatives, delegates or agents shall have any responsibility to any person (whether as a result of negligence or otherwise) for any determination made or anything done (or omitted to be determined or done) in respect of the LPMI and any use to which any person may put the LPMI. Lincoln International has no obligation to update the LPMI and has no obligation to investors with respect to any product based on the performance of the LPMI. Any investment in such a product will not acquire an interest in the LPMI. Lincoln International is not an investment adviser and will not provide any financial advice relating to a product linked to the performance of the LPMI. Investors should read any such product offering documentation and consult with their own legal, financial and tax advisors before investing in any such product.

© 2025 Lincoln Partners Advisors LLC. All rights reserved. LINCOLN PRIVATE MARKET INDEX and LINCOLN INTERNATIONAL are service marks owned by Lincoln Partners Advisors LLC and its affiliated entities. Any use of these service marks and these materials, including the reproduction, modification, distribution or republication of these materials, without the prior written consent of Lincoln International, is strictly prohibited.