I get a regular selection of recent corporate finance deal activity summaries in my email. Last week, I got one from Regent. Their view was that with the exception of a dip in August, valuation multiples in the European TMT sector have steadily edged upwards over the year, with:
- price / earning at 16 (as opposed to 14 this time last year); and
- price / sales at 1.1 (up from 1.0 this time last year).
However, for me, the story behind the story (so to speak), is the return of the trade sale. The IPO market for tech companies has been ‘sleeping’ for some time (although with Facebook and LinkedIn rumoured to IPO for this year it is starting to feel oddly like 1999 all over again) and post-Lehman the lack of (as much) leveraged debt has removed one of private equity’s key advantage over trade purchasers.
As a result the activity across the market (and certainly the cross-section of deals I am seeing) are, by and large, trade deals. Expectations of slow growth for some time in European markets has led to sellers being realistic about valuations and my expectation is that 2011 will see continued deal-flow, with trade buyers and sellers predominating.