Private equity multiples breached Fed guidelines in Q1, according to new data published on Thursday by PitchBook. It shows debt-to-equity multiples hit a whopping 6.2x in Q1, compared to 5.4x for the entirety of last year and a 5.19x average between 2011 and 2016.
What the Fed says: Four years ago, America's central bank issues guidelines that debt-to-EBITDA ratios (for most industries) shouldn't exceed 6x.
What happened: For a while, most everyone played by these rules ― largely because banks were scared of crossing the Fed. Then a bunch of one-off transactions began breaching the threshold, particularly in tech. Then "baskets" of deals began to breach. All the while, the Fed did little more than send the occasional letter of reprimand. The takeaway for banks was: You can do it, just don't flout it.