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As prices fall, deal volumes increase

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BDO’s Private Companies Price Index (PCPI) has seen the price/earnings multiples paid by trade buyers fall from an average of 11.7 times in 2010 to 10.6 times in 2011, thereby making transactions more attractive. 

However, the Private Equity Price Index (PEPI) has increased from 12.2 times to 12.8 times in 2011, which BDO attributes to the premium that private equity managers are willing to pay for hot assets. 

In total, 2,071 were completed last year, a seven per cent increase from last year, of which 83 per cent were trade deals and the rest were private equity transactions. Retail businesses saw the largest increase in deal volumes, mostly driven by distressed M&A activity. 

“While trade acquisitions continue to dominate, it is clear that private equity-backed transactions are stabilising at higher volumes. Against a background of uncertain macroeconomic factors, this may suggest that both corporate activity and private equity acquisitions are being driven by microeconomic necessity, namely returning corporate financial health on one hand and the overhang of funds to invest on the other,” says Christopher Clark, M&A partner at BDO.

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