There has been a sharp rise in the multiples that trade buyers are paying for private companies in the second quarter of this year, according to the latest private companies price index from business services firm, BDO.
The PCPI figures showed that the price to earnings (p/e) multiples rose to a peak of 10.8 in the three months to June 2011, increasing from 9.0 in the previous quarter. The average deal size included in the BDO figures is £12m (based over the past six years).
Christopher Clark, an M&A partner with BDO, explained that the figures indicated that there would be a significant effect on the expectations of people looking to buy and sell companies.
"With stabilising deal volumes and lower volatility in pricing, the scene is set for the continued reduction in the price expectation gap between buyers and sellers," Mr Clark said.
The figures contrasted, however, with the number of trade deals carried out in the second quarter, which fell 11.5 per cent. The index showed that there had been 371 such deals in the period, down from 419 in the first quarter of 2011.
Private equity acquisitions also saw a significant fall, down to 68 in the second quarter from 98 in the first. The total of 166 private equity deals in the first half of the year, however, was a slight increase from the 161 measured in the second half of 2010.
