UK business valuations rising again

December 7th, 2009 by Chris St Cartmail


During the third quarter of 2009 the Private Company Price Index (PCPI), which gives an indication of the average multiple of after tax profits at which private firms are sold for, rose again – much to the delight of anyone looking to sell a business. This is the second quarter in a row that we have seen rising multiples being paid. Please see our previous blog on business valuations rising posted in October.

Although merger and acquisition activity declined in the third quarter, for the seventh consecutive period, the multiples of profits at which business for sale are being sold for increased by 5 per cent. With the 5 per cent rise, people selling businesses were achieving an average of 11.7 times their historic after-tax profit. Of course, it should be noted that these figures relate to announced deals which have an average deal size of £15m. Smaller businesses multiples are lower overall to reflect the increased risk but if you wish to have a guide on the possible value of your business then please feel free to fill out our form for a no obligation business valuation

In addition to improvements in the PCPI, the Private Equity Price Index (PEPI), which tracks the multiples of profits that businesses sold to private equity achieve, also reported good news, rising 4 per cent to 12.3 times.

The continuing slow M&A market can be partly blamed on a more restrictive lending policies, particularly within the leveraged buyout market. This is reported to have offset the benefits an increase in corporate bank debt available to people wanting to buy a business for sale.

The increase in confidence among the corporate finance community has helped to boost the amount of money companies are being sold for. In addition, the number of exit reviews, proposals and pitches is increasing in response to a change in sentiment among business vendors. Many are realising that income and capital gains tax increases will catch up with them next year and that selling a business takes several months to complete – leading to an increase in the number of business being put on the market.

Business Sale Report has seen a 20 per cent increase in listings in the past quarter! To contact the sellers of these businesses then please subscribe.

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