Stock market boom puts private company sales on back burner

Michael Bow
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LONDON’S booming new issue market has cut takeovers of private companies in the UK by a quarter since the start of the year, as financial backers opt for stock market listings over auctions to cash out their stakes, fresh data reveals today.

Trade deals by privately owned companies tanked 24 per cent in the first three months of the year, while the number of private equity trade sales also fell 12 per cent, due to the lure of floating firms on the stock market, according to figures from accountancy group BDO.

London’s stock market enjoyed a record first quarter for new listings this year, with retailers leading scores of firms to float on the market.

“There has been a diversion of capital away from mergers and acquisitions. We do expect this to rebound towards the end of this year, as institutional allocations for new IPOs (initial public offerings) has become saturated,” BDO partner Tim Clarke said.

BDO’s data also shows prices for privately sold businesses are now higher than they were, with the typical business sold for 10.2 times its earnings before interest and tax compared to 8.1 times two years ago.