| Apart from telecoms, Irish private companies estimated to be worth nine times earnings |
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| What is your estimate of the P/E of Irish private companies, based on private corporate finance activity you have seen in the last 12 months? |
AIB Corporate Finance
P/Es for non-technology sectors depend on many variables - the particular industry sector, the market outlook, the company etc. It would not be unusual for a company with reasonable growth prospects, good management and a story to tell to attract P/Es in the 8-12 range on a sale.
In the technology sector P/Es are not the measure and anything is possible!
BDO Simpson Xavier
Corporate Finance
In my view the market falls into three segments. First of all there is the early stage technology sector where valuations are based on a “gut feel” based on the area they are operating. The more developed technology companies of the sector have been valued by multiples of revenue lines using international comparisons, (particularly US multiples), discounted for the fact that they are European stock and for the size of the operation.
The traditional market falls into two sectors. For businesses where there is a lot of competition, multiples in the order of 7-11 are applicable. For businesses with a strategic position in the market place, multiples can be irrelevant as people will pay for market position but if you were to ask me to give a range, it could be anything from 12 to 20.
CFI
Technology: P/Es have long since stopped being a means of calculating the value of a company;
Non-technology sector: 8.
Chapman Flood Mazars
Technology sector: 10-12+; Non-technology sector: 5-8.
Davy Corporate Finance
Technology sector: P/E?;
Non technology sector: P/E 8 to 10 times
Dolmen Corporate Finance
Technology sector: This is the wrong question - 10 to 100;
Non-technology sector: 6 to 10.
Deloitte Corporate Finance
Technology: P/E multiples are not generally applicable when looking at technology companies. Given the fact that many of these companies are loss making, other measures are now being used to benchmark the valuation of these companies such as revenues, customers/subscribers , click throughs etc;
Non-Technology sector: P/E multiples are primarily industry specific. Higher multiples are generally paid in sectors of higher growth and by trade acquirers who can achieve substantial savings post acquisition through synergies with an existing business. The size of the market and the level of penetration by the target company also has an influence. In the last twelve months, we have seen P/E multiples of between 7 and 15 times, with the average being 9 times.
Ernst & Young
Technology sector: (16 - 18); Non-technology sector: (10 - 12) (Historic).
Goodbody Corporate Finance
Technology: 3.5 to 7 times revenues for early stage companies; 40-60 times P/E;
Non-technology sector: broad range, probably in the range of 6-10 times P/E.
Grant Thornton
Technology: 25 to 75 (increasingly becoming a multiple of turnover rather than earnings!); Non-technology sector: P/Es of 8 to 15.
IBI Corporate Finance
Technology sector: no P/E ratio as few of these companies have an e.
Non-technology sector: highly dependent on the growth characteristics of the business, the synergy potential of the buyer, the sector, etc. However as a generalisation, 10-12 times.
Merrion Capital
Technology: P/E (not applicable) - Price/Sales 40;
Non-technology sector: P/E 8
NCB Corporate Finance
Technology sector: range 20 to 60;
Non-technology sector: range 8 to 12.
Broadly speaking, emerging private technology companies are valued by reference to their sales growth prospects rather than on a P/E basis.
It is not possible to estimate one P/E for Irish private companies. All companies have different earnings potential and, at the end of the day, developing competitive tension between bidders is key to achieving a strong multiple.
PricewaterhouseCoopers
Average exit P/Es in traditional businesses are around 8 to 10 times. In the technology sector, valuation is, at best, a creative art and, at worse, a wild guess. Whilst some will achieve spectacular returns, there will be many tears! |
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| Article appeared in the March 2000 issue.
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