Last quarter, companies paid the highest valuation multiples for acquisitions that they have paid in five years, according to BDO’s latest Private Company Price Index/Private Equity Price Index.
Research by the mid-tier accountancy firm found that with economic confidence returning, private companies were paying enterprise value/EBITDA multiples of 11.1 for acquisitions, an increase of 4.2 on last quarter.
Meanwhile, the multiples paid by private equity (PE) buyers held steady after a strong second quarter. In Q3, there was a marginal dip on the prices paid in the previous quarter to 9.8, down from 10.5.
Overall, PE deal volumes were down 15% last quarter at 79 deals compared with 91 deals from the previous quarter. But acquisitions by trade buyers increased 6% on the previous quarter with 405 trade deals completed, compared with 380 deals in Q2.
Commenting on the results, Tim Clarke, a corporate finance partner at BDO, said: “If you combine the prices paid by both private companies and private equity, the overall picture indicates that valuations are at their highest for several quarters.
“The UK is seen by investors as a stronger growth market than some of its competitors, with private company growth at the heart of the recovery. This is driving up their attractiveness to both PE and trade buyers, a significant proportion of which are coming from overseas.”
Sally Percy is editor of The Treasurer