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Company valuations picking up in London

posted Aug 6, 2009, 8:16 AM by Yale ReiSoleil   [ updated Aug 6, 2009, 8:20 AM ]
The price paid for companies as a multiple of earnings increased slightly in the last quarter, according to an index of merger and acquisition (M&A) activity.

The average multiple paid by private equity purchasers is now 11.8 times historic post-tax profits, up 13 per cent from the previous quarter, while trade buyers are paying 11.1 times profits, up ten per cent, suggests the research from business advisory firm BDO Stoy Hayward.

Christopher Clark, a partner at BDO, says, ‘Multiples on deals are rising and debt to leverage deals is now a much more realistic possibility. If companies are reviewing their balance sheets and looking at ways to raise funding or realise cash, the sale of non-core assets is now a realistic option.’

Multiples are still far from their respective peaks of 17.8 times for private equity deals and 14.1 times for transactions with trade buyers.

Aggregate M&A activity has fallen for the sixth successive quarter with fewer than half the number of deals completed in Q2 2009 compared to the same period of 2008, the report also claims.