BDO’s PCPI / PEPI* quarterly report shows that deal volumes fell by 13.8% from Q3, with a total of 514 transactions completing in the final quarter of 2019. The picture was similar across trade and private equity, with trade volumes declining by 13.3% to 423 deals, and private equity transactions dropping by 15.7% to 91. Compared with the same period a year ago, volumes were down by a third.
However, while deal volumes are down, high demand for quality assets is maintaining healthy valuation multiples. The Private Company Price Index (PCPI) and Private Equity Price Index (PEPI), which track the multiples paid by trade and private equity buyers for private companies, underline the health of the current M&A market.
The PEPI, which reflects private equity valuation multiples, saw a small fluctuation up to 12.2x from 11.8x in Q3 2019, in line with the steady profile seen throughout the last 18 months. Meanwhile, trade valuations recorded a respectable multiple in the quarter, demonstrated by the PCPI multiple of 9.5x in Q4 2019 (from 9.6x in Q3 2019).
The FTSE, another indicator of market confidence, also rose to a historic high of 13.9x as the General Election result gave greater clarity to the market.
Roger Buckley, M&A Partner at BDO, commented: “Q4 2019 was beset by delays and slow deal processes, with a number of acquirers and business owners sitting on their hands to see how political events unfolded.
“While the headline quarterly figures of deal volume might appear concerning, a look back over a longer period puts this quarter’s performance in perspective. Based on current activity, we expect Q4 to be a short-lived fluctuation. The decisive outcome of the General Election is spurring activity again, with initial indications pointing to a bounce back in deal volume for 2020.”
*Private Company Pricing Index / Private Equity Pricing Index
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