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Hunt for growth drives deal volumes and pricing

The total number of trade acquisitions for quarter two 2012 is up 17.3 per cent on quarter two 2011 from 371 to 435, according to the latest results from BDO’s Private Companies Price Index and Private Equity Price Index.

Over the last 12 months (to Q2 2012) private company deal volumes were up 21.2 per cent on the previous 12 month period from 1,492 to 1,809.

Trade buyers paid an average price/earnings multiple of 13.3 times in the second quarter, the highest multiple since Q3 2007, compared to 11.5 times in Q1 2012 and 10.8 times in Q2 2011.

The average multiple paid by trade buyers over the past 12 months (to Q2 2012) was 11.9 times compared to 10.7 times in the previous 12 month period.

Peter Hemington, M&A partner at BDO, says: “We are seeing relative stability in the volume of private company deals and deal pricing has been steadily rising. As organic growth remains challenging in difficult economic conditions, companies that have conserved cash during the downturn are increasingly focusing on acquisitive growth in order to satisfy shareholders demands for higher returns on capital. With a finite pool of high quality targets there is significant upward pressure on valuation metrics.”
 
The total number of private equity acquisitions was up 26.5 per cent year on year from 68 to 86.

Over the last 12 months (to Q2 2012) private equity deal volumes were up 11.6 per cent on the previous 12 month period from 327 to 365.

Private equity buyers paid an average p/e multiple in the quarter of 12.0 times up from 10.8 times during Q2 2011. The average multiple paid by private equity buyers over the past 12 months was 13.9 times compared to 11.3 times for the previous 12 month period.

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