64 deals £1.780 Billion

Dow Schofield Watts llp

 

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PEARLS OF WISDOM
   

PRIVATE COMPANY P/e's

 

FT500 PE

Private company p/e ratio's

% discount  to FT500

 

 

 

 

1987

20.1

15.9

21

1988

12.6

12.5

1

1989

10.2

12.4

(22)

1990

11.0

8.6

22

1991

13.1

8.2

37

1992

15.5

9.7

37

1993

18.1

11.6

36

1994

20.7

11.9

43

1995

17.0

11.3

34

1996

17.4

10.4

40

1997

18.9

10.8

43

1998

20.7

10.6

49

1999

23.9

11.6

 51

2000

31.5

14.2

 55

2001

23.1

13.8

 40

2002

19.9

12.5

37

2003

17.6

13.2

25

2004

16.9

14.0

17

2005 q1

15.2

13.1

14

2005 q2

16.4

14.0

15

2005 q3

15.9

13.1

18
       

 The discount is understated because it excludes bid premiums for quoted companies.  The discount arises from size and the perception that a quoted company is "cleaner".

 Average P/E ratio by size

Acquisition value £m

P/E

 

 

<1

7.7

1-3

8.6

3-5

8.6

5-25

9.1

25+

11.2

 

 

Companies under £1 million consideration typically 16% less than the average.

Companies sold for over £25 million, typically 35% over the average.

 Other factors:

Rescue purchases are at low p/e ratios;

Strategic purchases are typically at higher p/e ratios;  

The discount reflects "current" investor sentiment;

A two tier market has existed for many years with high quality high growth businesses attracting strong multiples.