Private Company Exit Multiples Set to Overtake Public Company Comparables

The PCPI, produced by BDO Stoy Hayward, tracks the relationship between the current four month rolling average FTSE Non-Financials price earnings ratio (p/e) and the p/es currently being paid on the sale of large private companies. It is calculated as the arithmetic mean of the p/es for deals where sufficient information has been disclosed.

As private companies are generally owner-managed, reported or disclosed profits tend to be suppressed by various expenses that may be non-recurring under a new owner. This will have been factored into the price the purchaser paid, but may not be reflected in the profits declared to the public. The effect of this is that the p/e paid as calculated...

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