Company valuations rose sharply last year to reach their highest levels since early 2007, according to an index by accountancy firm BDO.
Public companies are now valued at an average multiple of 15.1 times earnings, up 78 per cent over the year.
The value of private companies has risen to its highest level in two years, with the average multiple paid by trade buyers at nearly 12 times earnings, up 18 per cent over the past three quarters.
BDO partner Christopher Clark said: “We’ve seen a pretty dramatic recovery in public market multiples, particularly during the second half of 2009, as well as a mini-recovery in private company valuations.
“This recovery is due to rising public company valuations giving buyers greater confidence to pay higher prices, a lack of supply of quality assets and a pent up supply of private equity capital.”
The number of transactions, however, continued to fall, down 20 per cent on the same period in 2008.
Clark said: “Buyers might be faced with election uncertainty, cuts to public spending and tax increases, but there are plenty of positives. Many private equity houses have lost 18 months of deal activity. They will be looking to invest and make up for lost time.”