Prices held up for companies selling in the rush to beat the 5 April capital gains tax deadline, according to research from accountants and business advisers BDO Stoy Hayward, while private equity multiples falling back to match those being paid by trade buyers.
The latest private company price index which tracks price/earnings (p/e) multiples paid by trade buyers for private companies in the first quarter of 2008, held steady, showing even a marginal increase over the previous quarter – up from 12.9 times to 13.2 times, the latest research from accountants and business advisers BDO Stoy Hayward shows.
The private equity price index reveals comparable multiples on sales to private equity buyers were pegged back to 12.9 times in Q1-08, falling by 16% from 15.4 times in the last quarter of 2007 as private equity houses struggled to raise bank debt for new investment, according to the Cambridge Network.
A surge in deals before April 5 had always been expected as sellers rushed to beat the CGT deadline, but the volume of completions in Q1-08 at 791 deals, was significantly higher than in 2004 and 2005. However, deals involving private equity were the hardest hit by the credit crunch and only 129 deals were completed in Q1-08 compared with a quarterly average of 159 over the last four years – down 19%.
The BDO report notes that, were it not for the CGT deadline, volumes would have been lower without the accelerated sales and it predicts deal volumes will decrease further in the next quarter.
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