Higher multiples for UK company deals

PRICE to earnings multiples on purchases of private companies increased last year and will continue to rise in 2011, according to new research out today.

Multiples paid by trade buyers for private companies rose from average of 11.2 times in 2009 to 11.7 times in 2010, the BDO private company price index showed.

And for private equity buyers, the average multiple jumped to 12.2 times last year, from 11.6 in 2009.

“Throughout 2010 we saw that the quality of deals was improving, and the steady recovery of the economy meant that overall there were fewer ‘distressed’ transactions than in 2009 and more ‘traditional’ transactions,” the report said.

“There appears to be a greater focus by management teams on growing their business than the same time a year ago,” said Christopher Clark, M&A partner at BDO.

“Trade and private equity buyers appear to be gearing up to make further acquisitions and improvements in pricing are likely to tempt sellers back into the market.”

Over a fifth of deals (20.6 per cent) were for manufacturing companies, with business services (18.9 per cent) the second largest sector for deals.

Around 10 per cent of deals involved private companies that offer financial services.