Sales of privately owned UK mid-market companies fell in quarter four 2008 for the fourth consecutive quarter to the lowest level since 1998, according to BDO Stoy Hayward’s latest Priv
Sales of privately owned UK mid-market companies fell in quarter four 2008 for the fourth consecutive quarter to the lowest level since 1998, according to BDO Stoy Hayward’s latest Private Company Price Index.
As access to acquisition finance continued to be limited, the total number of deals in quarter four 2008, at 494, was down 26 per cent on the third quarter and was less than half the number seen in the same period in 2007, where 1035 disposals took place.
Trade sales fell by 52 per cent and private equity deals dropped by 70 per cent between quarter one and quarter four 2008.
Despite the sharp fall in deal volumes, private company prices held constant according to BDO Stoy Hayward’s latest figures.
The index, which tracks price/earnings multiples paid by trade buyers for private companies remained the same as quarter three’s index at 11.5 times (sold for 11.5 times their historic after tax profits).
The Private Equity Price Index, which shows comparable multiples on sales to private equity was 11.6 times, up only marginally on the previous quarter’s 11.2 times.
BDO says stability in the indices could be more indicative of vendors being unwilling to publish the actual value of their deals than company prices holding up across the market. The proportion of non-disclosed deal values rose from a two-year average of 36 per cent to 66 per cent this quarter.
Though it is common practice for principals not to disclose the transaction data for the acquisition of distressed assets, it is likely that the volume of accelerated or turnaround transactions has increased in recent months.
Christopher Clark, corporate finance partner at BDO Stoy Hayward, says: ‘There will always be a market for high-quality assets and as such, competition for the reduced number of stellar businesses will keep their values steady. The further reduction in volume is, in part, a result of the postponed disposal of less attractive companies – whether that be for the short or medium term is likely to be determined by accessibility to debt funding.’
