Results

Private companies’ enterprise values had decelerated from Q3

(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)

Credit Conditions Remain Mixed

While the covenant default rate reduced materially this quarter, this is driven by one large issuer (Company A) that is no longer in default after a restructuring was agreed to in Q4. Eight additional companies are no longer in default following amendments agreements. This was offset by six new companies defaulting in the last quarter. In addition, the percentage of companies with tight covenant headroom (i.e., < 10%) increased from 10% in 2024 to 15% of the portfolio in 2025. And lastly, while the proportion of companies with payment-in-kind (PIK) interest stabilized at 17%, there were also mixed trends here. Some companies showed better performance and reverted to cash-pay, but this was offset by new companies with PIK across their senior debt facilities.

Nick Baldwin, Managing Director in Lincoln International’s European Valuations and Opinions Group, commented, “Q4 performance in the European Lincoln PMI remained grounded in underlying company fundamentals, even as multiple contraction tempered overall performance. In an environment where public market returns can be driven by shifting sentiment, private market outcomes continue to be more closely tied to operating performance. Credit conditions remain mixed, and disciplined underwriting remains critical as some pockets of stress persist.”

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 single currency 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.

Academic Advisors

Professor Steven Kaplan

Professor Steven Kaplan is a Senior Advisor to Lincoln’s Valuations & 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.

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