Following the Q2 lockdown shock, the M&A market made a remarkable recovery in the latter half of 2020, with deal volumes soaring in Q4, according to BDO’s latest PCPI / PEPI* quarterly report.
In total, 717 transactions completed in Q4, up from 408 in Q3, representing a 76% increase. Trade volumes also rose from 338 in Q3 to 592 in Q4, while PE volumes nearly doubled to 125 (from 70 in Q3).
Q4 volumes represented the highest levels recorded for two years for trade, and the highest since Q2 2016 for private equity. The quarter made an important contribution to the year, resulting in overall 2020 volumes down by just 14.5% compared with 2019. While these are the lowest volumes seen since 2014, a longer-term view reveals that the global pandemic and ongoing Brexit uncertainty had relatively little impact on the M&A market overall.
Trade multiples were maintained at 10.2x (Q3 10.6x), while PE multiples edged up to 12.2x (Q3 11.6x). Meanwhile, as Brexit completed, the FTSE all share bounded to a high of 14.8x.
Roger Buckley, M&A Partner at BDO, commented: “Despite a global pandemic and the prospect of no trade deal with Europe, the fourth quarter of 2020 saw the highest levels of deal activity for years. While much of this was a catch up on processes that had been on hold earlier in the year, and driven by favoured sectors including tech, there was a wider sense of businesses putting uncertainty aside to move forward with their strategies.
“Looking ahead, we expect the market to remain active with plenty of cash chasing transactions of quality businesses that have strong underlying earnings.”
*Private Company Pricing Index / Private Equity Pricing Index
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