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<strong>Bay</strong> <strong>Street</strong> in Toronto, Ontario is seen here Thursday Feb. 9, 2012.Tim Fraser/The Globe and Mail

Even before public investors decided that they weren't going to pay so much for companies, private equity firms were already paring back what they would put on the table.

The key valuation multiple for private equity deals has been coming down for a year, well before stock markets in general sold off.

The median enterprise value to earnings before interest, taxes, depreciation and amortization (EV/EBITDA multiple) has been trending downward for deals in all size ranges, according to PitchBook.

The largest private equity deals, at $250-million and up, have seen EV/EBITDA multiples drop from more than 12 times in the first quarter of 2012 to less than 10 times in the first quarter. The multiple for all deals has been dropping from close to 8 a year prior and now stands at 5.5 times.

And it wasn't because PE firms were looking at turnarounds and broken businesses instead of paying for growth. PitchBook's figures show that 73 per cent of companies acquired had increased revenue more than 10 per cent in the past 12 months.

(Boyd Erman is a Globe and Mail Capital Markets Reporter & Streetwise Columnist.)

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