Businesses have been selling for less since the credit crunch, and the trend is set to continue, according to accountancy firm BDO Stoy Hayward. Companies are currently being sold to private equity for 15.1 times their post-tax profits, compared to 17.8 from April to June.

Businesses have been selling for less since the credit crunch, and the trend is set to continue, according to accountancy firm BDO Stoy Hayward. Companies are currently being sold to private equity for 15.1 times their post-tax profits, compared to 17.8 during the second quarter of this year.

Vendors of businesses to trade buyers are faring no better, with multiples of 13.4 and 14 times profits paid for private and quoted businesses respectively, down from 13.6 and 14.7 in the second quarter.

Jon Breach, partner at BDO, says that the fall in valuations is unsurprising given recent ups and downs in the financial markets. He continues: ‘It was only a matter of time before the lending that private equity firms rely on – particularly on deals at the higher end of the market – began to dry up.

‘This could be just the beginning as the full impact of the seismic shift in the debt market has yet to play out.’

Breach adds that proposed changes to capital gains tax will help keep prices down. The changes, which will see business owners paying tax of 18 per cent instead of ten per cent on the sale of their companies, are expected to drive a ‘flurry of deals’ before April as vendors rush to avoid the higher rate.