Strong deal valuations persist as Private Equity demand continues to intensify

Dealmakers continue to see strong deal valuations with Private Equity firms leading the charge to deploy the global surplus of cash, reportedly in the region of €1.1 trillion. [1]

The Q.2 2020 ‘Covid correction’ saw Private Equity as a sector rebound strongly compared with other asset classes, a fact which then continued throughout the following year as investors sought out the highest possible returns on their investments. [2]

Unsurprisingly, 2021 closed out the year with a significant increase on PE deal values (see the chart below), evidence of the strong demand pent up in the sector in the wake of the 2020 hiatus. As Q.1 2022 M&A activity intensifies, this tangible trend remains. PE managers have been scouring markets to identify new acquisition targets driven by strong investment demand, in a bid to leverage underutilised resources.

Private Equity Deal Value €B 2018 – 2021 (as at 31st December 2021) [3]

 

 

 

 

 

 

 

 

 

 

 

 

What this means for owners and shareholders of SMEs and Corporates is that there has never been a better time to pursue a company sale or exit. Particularly as commentators forecast very little is likely to change in terms of PE acquisition appetite or demand levels from institutional investors.

Steve Barry, Senior Client Director at Evolution CBS, comments:

“As we expected, there have been strong valuation multiples in the technology sector, however our clients in industrial sectors, such as construction and engineering, are also attracting higher multiples. It’s clear that strong market demand is set to remain a key feature of 2022.”

 

 

Additionally, companies that have used the pandemic to sharpen their strategy, iron out cash flow issues and that demonstrate compelling, profitable growth potential, are best positioned to capitalise on this investment demand.

The only caveat underlying this positive momentum is the spectre of possible market disruption, not least the rising tensions between NATO and Russia. Overall, as a business owner or shareholder whatever your situation, the bullish prediction for 2022 is this could be the moment to secure a higher valuation on exit, all things remaining equal.

If you are considering a future sale of your business, why not try our free online valuation service, which will provide you with a bespoke Business Valuation Report. Our valuations are derived from your business data, including financial and operational metrics, combined with data from the world’s largest provider of business valuations. Contact us today: ithomson@evolutioncbs.co.uk or 0118 959 8224.

 

About EvolutionCBS

EvolutionCBS works with the owners and shareholders of private businesses, helping them to maximise the exit value of their companies. Our high-touch, low volume approach, combined with our values of “Uncompromising Standards” and “Exceptional Results” means that you can be absolutely confident of achieving the best outcome for you and your company.

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Notes:

[1] (Source: S&Q Capital IQ, PE managers expect another boom year in 2022.)

[2] (https://www.mckinsey.com/industries/private-equity-and-principal-investors/our-insights/mckinseys-private-markets-annual-review)

[3] Pitchbook, European PE Breakdown 2021 Annual

 

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