Private investment holds firm
Deal volumes may be declining but the prices paid for private companies are holding broadly steady.
In the fourth quarter of 2002 price earnings multiples paid for private companies fell only slightly to 12.1 from 12.5 in the third quarter, according to the BDO Stoy Hayward/ Acquisitions Monthly private company price index.
The index has reached a recent high of 13.8, recorded in the fourth quarter of 2000.
The trend is reflected in the quoted sector: measured by the FTSE non-financials index, multiples dipped from 19.9 in the third quarter of last year to 19.4 in the fourth quarter.
BDO corporate finance partner Peter Hemington said this was one of a number of encouraging signs despite the fact that the initial public offering market was ‘moribund’.
Acknowledging that UK deal volumes have declined by 16% with total deal value falling by almost 30%, he said: ‘One of the key problems is that the economy is presenting a distinct “two-speed” growth pattern.’
He added: ‘Although the flow of deals has diminished, those that have been announced are more likely to complete.
‘And while the market has yet to show signs of recovery, there will always be an appetite, particularly among the private equity community, to invest at the right price in good quality business.’
