Following record low M&A deal volumes in Q2 2020, the market experienced a strong recovery in Q3, according to BDO’s latest PCPI / PEPI* quarterly report.
Transaction volumes rebounded by 63%, with 408 transactions completing in Q3, up from 250 in Q2. Trade volumes also rose from 214 to 338, while PE volumes nearly doubled in the same period from 36 to 70. Although levels are still around a quarter below the volumes seen before the coronavirus pandemic hit, the recovery in Q3 was pronounced.
The deal landscape was dominated by resilient businesses across sectors including technology, life sciences and healthcare. There was also a notable increase in deals within the construction and building products markets, which were quick to resume activity over the course of the summer.
Trade multiples rose to 10.6x, up from 10.1x in Q2, while PE multiples surged to 11.6x from 10.3x in Q2. A similar profile was seen with the FTSE, which climbed to 12.6x from 11.8x.
Roger Buckley, M&A Partner at BDO, commented: “In the midst of the pandemic, such a recovery in deal volumes, not to mention a rise in values, may be quite a surprise. Yet there are many high-quality, resilient businesses which are maintaining or growing in value, and a wealth of domestic and international and financial buyers with strong firepower. Unlike the last recession, where liquidity was a huge issue, today there is no shortage of cash, and no shortage of buyers keen to spend.
“Looking ahead, we expect to see increasing polarisation of the M&A market between resilient businesses and those that are struggling. In certain sectors, we may see an increase in stressed and distressed disposals as we move into 2021 and beyond.”
*Private Company Pricing Index / Private Equity Pricing Index
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