Private equity valuations face scrutiny as data tools reveal potential overvaluation and deal activity accelerates

Morning from London , an edited dispatch expanding on a Europe-focused wire.

Clipway, the secondaries specialist, has used its Tech-Enabled Secondaries System (TESS) to run a broad, data-driven check on private equity valuations and asset quality, analysing more than 1,943 funds and some 21,300 underlying portfolio companies, according to the original report to PE Hub. The study found that high headline valuation multiples do not always reflect higher‑quality underlying assets , a mismatch the firm says is increasingly visible among portfolios valued above 15x EBITDA with average entry dates in 2020–21.

“We were seeing a lot of portfolios – more than we were expecting – being valued above 15x EBITDA,” partner Jonathan Hillgarth‑Williams told PE Hub. The dataset showed valuation multiples rising since entry in 2020–21 even as interest rates increased in 2023–24. Clipway noted that, while average EBITDA compound annual growth rates since GP entry exceeded 20 percent, sponsors typically do not separate organic and inorganic growth, which can mask whether M&A has truly delivered repeatable equity value.

To probe that distortion, Clipway created a Valuation to Equity Growth ratio (VEqG), dividing a company’s EV/EBITDA by its equity growth rate to show how much investors are paying for each unit of equity growth. “The lower the ratio, the cheaper you are acquiring the growth,” the firm said. Using VEqG, Clipway found roughly 80 percent of companies sit within a sensible range, while about 20 percent sit outside it , a mix that includes both high‑ and low‑multiple businesses. The tool is presented as a complement to traditional diligence rather than a panacea, and the report flags size, differing holding‑period stages and leverage as important caveats.

Clipway said VEqG is valuable for rapid, repeatable screening across large samples and for flagging cases that warrant deeper investigation. “It is critical for us to have repeatable, simple tools to help build understanding of quality and risk on a very large number of companies in a very short amount of time,” Hillgarth‑Williams said, adding the firm plans to expand TESS‑driven analysis and stress‑test private equity return outcomes under multiple scenarios.

Separately, CVC has been active on two sizable transactions. Funds advised by CVC have agreed to acquire Smiths Detection from Smiths Group for an enterprise value of £2.0 billion; the business is a global provider of threat‑detection and security‑screening technology and employs about 3,400 people. The parties expect completion in the second half of 2026, subject to regulatory approvals and customary conditions, according to the companies’ announcements. CVC has said it will support Smiths Detection’s continued technology and engineering investment.

And CVC, together with the Abu Dhabi Investment Authority, has agreed the sale of appliance‑care group Domestic & General to Asurion. The purchasers describe the combined business as creating a global leader in device and appliance care; the transaction is expected to close in mid‑2026, subject to regulatory approvals. CVC’s statement noted Domestic & General’s transformation under its ownership into a digitally enabled, subscription‑based business with growing international footprint and more than £1bn in annual revenue.

Taken together, the Clipway analysis and the flurry of deal activity underline two concurrent themes in private markets: the increasing use of AI and systematic metrics to interrogate valuation quality, and continuing buy‑side appetite for strategic industrial assets that deliver scale and recurring revenues. As Clipway’s work suggests, buyers and their committees now face the twin tasks of interrogating growth composition and ensuring multiples paid actually buy durable equity value.