Consolidations and start-ups expected despite flat market
Valuations of brokers have nosedived from their pre-recession highs to around 1.3 times brokerage income, according to corporate advisers Lexicon Partners.
Brokers commonly sold for between four to seven times brokerage before the economic downturn, but according to Lexicon executive Joe Suddaby, firms are now being snapped up for a fraction of that amount.
Suddaby, speaking at the Biba Forum in Manchester last week, said that figure was based on analysis of recent transactions in the market.
He said: “The uncertain environment means that acquisitions are less likely to get a significant premium compared to current earnings.”
CCV chief executive Michael Rea said that Suddaby’s figure tallied with the ratios between valuations and turnover that his firm was looking at. “That seems in the middle of where valuations are at the moment,” he said.
Suddaby added that, despite the depressed state of the market, he expected to see “a bit more consolidation activity over the next couple of months”.
Broker Network managing director Nick Houghton said that he detected a lot of interest in start-ups, but predicted little chance of rates increasing over the next year.