 Boots is just one high street name to be fought over by private equity |
Private equity buyers are shelling out more for companies than they have for six years, according to new research. The price to earnings ratio of deals involving a private equity buyer has reached 17.6 - a level which has not been seen since 2001.
A shortage of high quality assets for sale and an enthusiasm by banks to help fund buyouts is pushing up the value, says BDO Stoy Hayward.
But the study also showed the number of deals had decreased from last year.
High prices
In 2002, the price - on average - being paid by private buyers for companies taking into account their earning potential, was at a six-year low.
This lull followed the sell-off in technology stocks, which brought the whole market to its knees.
Over the past 12 months, the value of private equity deals have surged and now stands at a 10% premium to the value of corporate takeovers, according to BDO Stoy Hayward, the accountancy and business advisers.
The firm also shows the prices private investors are willing to pay will get even higher - even in the face of economic pressures, such as rising interest rates and a strong pound.
"As we have seen recently with deal speculation surrounding the likes of Sainsbury's and Boots, private equity houses, often from overseas, still have significant amounts of cash from recent fund raisings to invest," said Jon Breach, a partner at BDO Stoy Hayward.
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