As the majority of our clients are privately owned, it is essential that we have a robust and evidence based methodology to valuing private companies. Traditionally, this is seen as a notoriously difficult and subjective area of corporate finance and yet remains one of the most important aspects of any transaction involving a private company.
Having completed 238 deals over the last ten years, we have extensive experience as well as a large database of completed deals on which we can base private company valuations. However, with a continuous focus on obtaining the best deal for our client, we not only store and analyse our own data, we also collaborate with other leading corporate finance firms and Experian PLC to obtain detailed pricing data of private company sales.
This database is referred to as ‘PERDa’ and is considered the authoritative guide to the pricing of private company sales and acquisitions across the UK and Europe. The PERDa database uses information on completed private company deals to provide a robust insight of both historic and current Price Earning Ratios (i.e. consideration as a multiple of the seller’s profits).
The PERDa database allows us to understand the actual price paid for businesses and allows us to start any negotiation process from a position of information superiority. We can iensure that buyers do not overpay for strategic acquisitions, as well as maximise value as part of a disposal process.
In comparison to PERDa, the BDO private company price index is based on larger sized deals which can affect the data, whereas PERDa is based on slightly smaller deals, more in line with the SME market that we serve. For this reason, HMRC are generally happy to accept the latest PERDa Earnings Before Interest Taxes average when agreeing share valuations (i.e. for EMI share options), underlining PERDa as a respected SME valuation tool.
More information can be found at www.perda.co.uk.