The number of M&A deals completed in the first quarter since the Brexit result has fallen, but experts are saying this is just a “bump in the road” as both activity levels and valuations have held up well compared to previous quarters.
The analysis comes from accountancy and business advisory firm BDO’s latest PCPI/PEPI report. According to the report, 578 deals were completed in the third quarter of 2016. This is compared to the record number of completions (707) in Q2 2016, but ahead of a number of previous periods.
The PCPI/PEPI index, which also tracks multiples paid by trade and private equity buyers for private companies saw both trade (10.0x) and private equity (11.3x) prices decline marginally from 10.2x and 11.5x respectively.
Despite the slight downward movement, future multiples are expected to remain resilient, reflecting the significant appetite and spending power of corporates and private equity investors.
Roger Buckley, M&A Partner at BDO, commented: “In general, the market has taken Brexit as a bump in the road rather than a car crash. Businesses are being pragmatic about what the future holds, however they are not letting the uncertainty of the UK’s relationship with the EU dent their ambitions.
“The Q3 results are not indicative of a stalling market; appetite is strong from buyers both here and abroad, although Brexit is inevitably a factor for consideration. We continue to see more buyers than sellers in the market, and valuations remain strong for good quality businesses. A number of overseas buyers are seeing this as a good time to acquire in the UK following the depreciation of sterling, and we expect deal volumes to continue strongly in the final quarter of the year.”