UK M&A Valuation Indices – Report Overview

MarktoMarket is delighted to launch its inaugural UK M&A Valuation Indices for H2 2019. The Indices have been created in response to requests from advisory and investment firms for high-level reference points for the valuation of private UK companies based on size and sector characteristics.

These indices have been compiled using MarktoMarket’s proprietary deal data as well as transaction information submitted by many of the UK’s most active M&A advisers. The Indices focus on the small and mid-market where data is scarce and are presented by deal size and sector.

2019 m&a pricing trends

As the cut-off point for data in the MtM Indices was December 2019, the trends do not reflect any adverse impact on multiples as a consequence of the COVID-19 outbreak.

The MtM Indices suggest that UK M&A multiples trended lower in 2019 versus both 2018 and 2017. The mean EV/EBITDA multiple in 2019 was 9.08x versus 9.99x in 2018, a fall of 9.1%.

A possible explanation for this is that Brexit uncertainty reduced buyer interest and, therefore, depressed pricing. However, this contraction in multiples did not occur in our smallest indices, perhaps implying more of a ‘business as usual’ approach to M&A from the UK’s smallest companies. These was also a revealing picture within industries, with the Consumer sector index rising year-on-year, whilst both Industrials & Business Support Services and Technology, Media & Telecommunications trended lower.

Deal size and Multiples

The MtM Indices also demonstrate a clear correlation between deal sizes and multiples paid. The magnitude of the multiple differential between size bands creates significant arbitrage opportunities for ‘buy and build’ acquisition strategies.

Sectors and multiples

The valuation disparities between sectors is perhaps the least surprising. Technology companies, particularly those in software, will be associated with high revenue quality and, therefore, high multiples. However, the strength of the Consumer Index, traditionally seen as more domestically-focused than technology, in 2019 may surprise some, although positive movements in consumer-focused indicators (such as the ASDA Income Tracker) align with this upwards trend in valuation multiples.

The Executive Report is available to anyone working in advisory or investment roles. Access to the full report is reserved for members of the MarktoMarket Data Co-operative, a group of the UK’s leading M&A firms.