Prices paid by private buyers of restaurant companies in the private market have been higher than the mean valuations of many publicly traded companies, excluding only the extremely large chains such as McDonald's. Approximately 60 percent of the larger publicly traded fast food chains are selling as valuations below the mean EBITDA (earnings before interest, taxes, depreciation, and amortization) multiple of recent private acquisitions in the fast food segment of the foodservice industry.
Although the largest fast food chains continue command a higher multiple to EBITDA, the maturity phase of an industry can be indicated by the deterioration in multiples of the weaker players. It is unusual in the United States to have so many public companies selling at multiples below the mean acquisition multiples of privately owned restaurant companies.
The dichotomy in opinion between the investment community and the executives of the publicly traded fast food companies is further exemplified by instituted share repurchase programs over the past year. Clearly, the executives of the publicly traded fast food chains believe that private investors are basing their decisions on erroneous valuations.
Trend sales growth in the restaurant and fast food segments of the foodservice industry has slowed in recent years from the rapid pace of the period extending fr