Pent-up demand leads to more deals, says BDO

MERGER and acquisition activity rocketed during the third quarter of 2014, as pent-up demand was finally released, according to accountancy and business advisory firm BDO.

BDO’s latest PCPI/PEPI report, which tracks trade and private equity price patterns when buying private companies, found that trade deals jumped by 36 per cent in the third quarter of 2014. Similarly, the volume of private equity acquisitions increased by 32 per cent to its highest level since 2009.

Jason Whitworth, the merger and acquisitions partner at BDO in Yorkshire, said: “While we are seeing capital markets take a pause for breath, the appetite for deals in the private company arena are undiminished.

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“The strength of manufacturing continues to drive activity in Yorkshire and Humber, with a third (31.7 per cent) of all deals so far this year coming from this sector.

“We’re also seeing mid-market transactions pick up the pace, with volumes increasing by almost 30 per cent compared to the same period last year.

“Buyers are willing to pay good prices for these businesses too. Deal values in the mid-market have witnessed a significant rise of 51 per cent in 2014 – much more than the 17 per cent increase reported for smaller-sized deals.”

Despite market apprehension, activity hasn’t been affected by the impending General Election, according to BDO.

Mr Whitworth said: “What we are not seeing, somewhat surprisingly, are prices being lowered to get deals done ahead of the impending General Election.

“There seems to be a working assumption in the market that the Capital Gains Tax rate won’t change in the next Parliament and, therefore, pricing remains resilient.”