The average multiple of a takeover – which tracks the link between the takeover price and the target company’s operating profits – rose to 10 times earnings for trade buyers this year, according to BDO.
The figure is up on the 9.2 times multiple recorded for the prior period. Private equity firms continue to pay more, with their deals going for 10.8 times earnings versus 10.9 times in the prior period, the stats show.
However, valuations are lower than the average multiples of blue chip companies, with the FTSE All Share index recording an earnings multiple of 12.5 times for the second quarter.
“Unsurprisingly, private equity continues to pay a premium for quality assets as the auction processes remains competitive, debt markets are strong and there is a keen desire to invest at this stage of the economic cycle,” BDO M&A partner Roger Buckley said.
Overall, M&A in the UK for the three months ending June was slightly higher than the first quarter of the year, with 509 deals compared with 499.
Total deals for the period came to 1,008, the highest number of takeovers for the period since 2012.