Perda: Investors Paid 7% More For Businesses In 2017
Businesses in the UK have been selling at an average of 7.3 x EBIT, according to PERDa.net. This compares with a multiple of 6.8 in the corresponding period a year ago. According to Perda:
The graph shows the rolling six month average ratio between enterprise values and underlying profits (EBIT) for deals across the UK.
Perda, or the Price Earnings Ratio Database, tracks prices across transactions for private businesses and has a UK focus. They publish bi-annual reports, available here, on the state of play covering deal volumes and prices achieved.
Data for the PERDa reports come from (unnamed) corporate finance firms and from Experian. Note that PERDa coverage is for mid-market companies – average company size is circa £20m in revenue / £3m-£4m in profit. PERDa twice a year newsletters, with pricing and volume data, are provided free of charge on their website.
Price data on smaller companies is harder to come by as these deals are, by their nature, closed to the public and are so widely distributed that it makes collection difficult. Where such data is collected, there is the inherent self-selection bias in addition to a reliance on figures reported rather than figures actually achieved. This is unlike prices for transactions involving residential property where actuals are available from the Land Registry in addition to independent sites such as Zoopla and RightMove.
Various sites such as MyBizdaq and the business-for-sale MLS* (eg DaltonsBusiness & BusinessesForSale) do sometimes publish their own data. However, this data tends to be based on turnover and profit figures self-reported by owners of small businesses and could be viewed as less reliable. However, their stats on the most active sectors is based on more reliable data.
*MLS = Multi-Listing Sites
In the US, Business Brokerage Press tracks and reports pricing stats to business brokers. Here, for example, is their extensive pricing report for 2016 (price $155).
