If you're a SME business owner considering selling your company, it's important to understand how other companies' valuations will affect what you can achieve. M&A valuations can be complex, but this brief update will give you the basic headlines and help you understand what to expect in 2022 from the performance of 2021. With this knowledge, you can begin to make informed decisions about your company's future.
So what's happened? Deals continued to fly in 2021 with both transaction volumes and multiples remaining resilient throughout the year.
For the key market of companies valued under £250m, Branta's friends at MarkToMarket have found that the average Enterprise Value to EBITDA multiple paid over the year was 9.9x. The 2020 comparison was 9.5x. You can read their excellent report with more detail here.
But the headline data tells only a fraction of the story. There are many valuation points in companies up to £250m dependent on factors such as size and industrial sector. For example in the TMT sector, average multiples were 11.4x as software companies remained strongly in demand. Whilst Consumer attracted the lowest multiples at (a not to be sniffed at) 8.5x.
Deal volumes increased significantly in 2021 – up 46% on 2020 (5,980 deals versus 4,045 PY). Contributing factors were the rumoured changes to the CGT landscape in Q1 and the CV19 vaccination programme. Capital remained as plentiful as ever supplied by banks and PE in a low interest rate and low inflationary environment.
So, what does all of this mean for business owners? The current market conditions are still ripe with opportunity for those who are looking to sell their businesses. But things are changing and nobody can predict where current geopolitics will take us.
With company valuations remaining high and capital readily available in a low interest rate environment, now is as good a time as any to reassess your company’s future and see if selling it is an option you may want to explore.
If you have any questions about the implications of selling your business or would like to discuss the process further, please don’t hesitate to give us a call here – we would be happy to help.
