M&A valuations set to return to heights of 2007

Michael Bow
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COMPANY bosses predict M&A values will surpass the frothy heights reached in the boom of 2007 by the end of the next year, a study shows.

Valuations are expected to rise to a multiple of 11.3 times a company’s net earnings by the end of 2015, up 23 per cent from 9.2 times at the end of 2013 and above the price paid for companies in 2007 when valuations rose to 11.1 times net earnings.

Technology, media and telecom assets are expected to become the most expensive asset – with multiples of around 11.7 times net earnings.

Rising TMT valuations have been driven by a industry-wide consolidation in the telecoms sector, led by deals such as Vodafone’s €7.2bn acquisition of Ono and Altice’s €17bn purchase of SFR. Meanwhile, China is expected to be the region with the most expensive assets by 2015, with companies anticipated to sell for 12.6 times net earnings.

The data also shows a decline in the proportion of so-called goodwill – the excess price paid over the actual value of the asset – factored into the valuation price, falling from 34.6 per cent of buyout values in 2010 to 30.5 per cent in 2013.

The poll, from American Appraisal, assessed attitudes from 144 respondents around the globe, 108 of whom were senior corporate executives and the rest private equity dealmakers.

“After a freeze on liquidity, cash-rich companies and freshly funded private equity firms are aggressively pursuing transactions,” American Appraisal managing director Mike Weaver said.

“There seems to be a buyer for everything at the moment and some people are paying top whack.”

The number of M&A deals inked last year rose to 14,077 deals in total, a steady rise from 13,621.

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