Q4 Deal Volumes at Highest Level Since 2011, Says BDO Analysis
6th February 2015
The last quarter of 2014 ended with the highest M&A deal volumes since 2011, according to the latest PCPI/PEPI index from accountancy and business advisory firm BDO LLP, indicating that uncertainty around the looming General Election is not curbing M&A activity.
The index, which tracks the multiples paid by private company (trade) and private equity buyers, found that there was a 14% increase in trade deals compared to the previous quarter. Private equity activity was still buoyant but down from a sky-high 107 to 97. Prices paid for private companies continued its upward trajectory, reflecting the premium that corporates and private equity investors are willing to pay when faced with the shortage of quality businesses on the market. Trade multiples have moved up strongly from 10x (Q3) to 11.7x (Q4), while private equity multiples increased from 8.0x to 9.5x. In Yorkshire, a total of 419 M&A and equity capital transactions were recorded in 2014 according to Experian Corpfin. The manufacturing sector was the most active, with more than a third of all deals in the region involving manufacturers. The number of Yorkshire deals involving mid-market companies increased by 31%, while deal values increased by 48% for these companies. UK-wide the financial services sector was the most active in terms of deal volumes, accounting for 27 per cent of the 4,936 deals completed in 2014. Jason Whitworth, M&A partner at BDO in Yorkshire, said: -Last quarter concludes a solid year of trading for companies. We are seeing corporates and private equity firms remaining keen to acquire in the lead up to the impending General Election, despite the uncertainty that this represents. -The increased volume of deals coupled with the improved multiples show that there a willingness to spend cash reserves on good businesses. We can expect that technology and regulation will continue to act as the major drivers of deal activity, particularly in the financial services sector. Locally, manufacturers will continue to play an important part of trade and private equity investment. Overall 2014 was a successful year for many businesses. BDO enjoyed a record year of deals in the UK, completing 250 transactions with a combined value of £11bn. Jason Whitworth added: -Based on the current pipeline, there appears to be a positive outlook for deals in 2015. Activity remains strong and while deal-making often takes a pause during election time, there is every reason to remain hopeful for another buoyant year for M&A.
