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 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 their upward trajectory. Trade multiples moved up strongly from 10x (Q3) to 11.7x (Q4), while private equity multiples increased from 8.0x to 9.5x. This reflects the premium that corporates and private equity investors are willing to pay when faced with a shortage of quality businesses on the market.
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. However, manufacturing topped the league table in the North West with a third of all deal activity involving manufacturing firms.
Ruth Percival, M&A partner at BDO in the North West, 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 is dry powder and a willingness to spend cash reserves on good businesses. We can expect the manufacturing sector to continue to dominate M&A activity here in the North West, however consumer markets and TMT will become increasingly on the radar 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. BDO was also named by Experian Corpfin as 2014’s most active financial adviser in the North West.
Ruth Percival 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.”
