Middle market private companies in the Golub Capital Altman Index grew earnings by 16 percent during the first two months of the fourth quarter of 2023, the highest year-over-year earnings growth since Q2 of 2021. Revenue grew 7 percent during the same period.

Lawrence E. Golub, CEO of Golub Capital, said, “We expected to see strong growth in Q4 2023 and the data exceeded even our expectations. As we said throughout 2023, private equity-owned middle market companies in general are proving resilient and adapting well to the environment. Our middle market report has also performed well. Every quarter in 2023, our data provided consistently correct early insight that economic growth was exceeding the prevailing consensus. The strong revenue and earnings growth of the Golub Capital Altman Index in Q4 2023, in our view, caps off a year that bodes well for investors in private equity. Despite concern about the potential impact of high interest rates and economic uncertainty on the returns of recent private equity fund vintages, fundamental earnings growth gives investors a reason for cautious optimism.”

Dr. Edward I. Altman said, “The Golub Capital Altman Index for Q4 2023 shows that the middle market is in robust shape. Quarterly EBITDA growth of 16.3 percent year-over-year was the highest in the eight-year history of the Index, apart from the anomalous rebound from 2020 Covid shutdowns in Q2 2021. While Index results were strong across all subsectors, technology continued to outperform. The latest employment data shows that the labor market remains tight, and small- to medium-sized businesses face ongoing shortages of skilled labor. It is not surprising that mission-critical providers of productivity-enhancing enterprise software would benefit from these trends. Our middle market firm indexes, especially the growth rate of aggregate and sectoral EBITDA, have proven to be excellent predictors of overall GDP and larger firm growth in 2023 and we expect these indexes of primarily private equity-owned firms, diversified across several industrial sectors, bodes well for 2024.”  

The Golub Capital Altman Index (“GCAI”), which is produced by Golub Capital in collaboration with credit expert Dr. Edward I. Altman, is the first and longest-running index based on actual revenue and earnings (defined as earnings before interest, taxes, depreciation and amortization, or “EBITDA”) for middle market companies. It measures the median revenue and earnings growth of approximately 110–150 private U.S. companies in the loan portfolio of Golub Capital, a leading middle market lender. Reported shortly before public company quarterly earnings season, the GCAI has served as a reliable indicator of the overall growth rates in revenue and earnings of public companies in market indexes such as the S&P 500 and S&P SmallCap 600 (“S&P 600”), as well as quarterly Gross Domestic Product (“GDP”), according to statistical back-testing dating back to 2012, when data began to be tracked.

The size and diversity of the Golub Capital loan portfolio ensure that the confidentiality of all company-specific information used in the index is maintained in both the aggregate and industry segment data.  

We believe the results (1) are representative of the general performance of middle market companies, which are a major contributor to U.S. private sector employment; (2) can be easily compared to the performance of the public companies that make up major stock indexes; (3) are relevant to the aggregate economic performance of the U.S. economy and (4) provide timely information for the investment community.  

The companies in the GCAI operate in a wide range of industries. Results are provided for the total universe of GCAI constituents and by industry segment. Given the index’s limited exposure to Financials, Utilities, Energy and Materials, comparisons are made to the S&P 500 and S&P 600 as well as to “adjusted” versions of those indexes that exclude the aforementioned sectors.