Despite interest rates increasing on nine occasions during the year, recurring income multiples, which continue to be the most common approach to valuation, grew from an average of 3.4 times in 2021 to 4.1 times in 2022.
Profit multiples, which account for 35 per cent of valuation approaches, grew from an average of 6.9 times in 2021 to 8 times in 2022.
Louise Jeffreys, managing director of Gunner & Co, said: “Despite a choppy year for the markets and consecutive interest rate hikes, the M&A market has continued to grow.
“We continue to get inquiries from new buyers every single month, meaning demand consistently outstrips supply of businesses for sale.
“This is positive news for business sellers, the upside being that there is a myriad of buyers out there with different propositions, which should translate to encouraging exit options for all.”
Spurred by continued competition in the buyer market, demand for acquisitions remained strong in 2022 with more than 90 deals announced, compared to 93 in 2021.
Gunner & Co said the biggest winners in 2022 were Perspective, announcing 12 deals and Kingswood, with 10.
Meanwhile, the analysis on deal size found the average deal value for 2022 increased by 17 per cent.
Jeffreys said: “The market has diversified over the past four years, with large national consolidators being joined by a contingent of start-up acquirers, preferring a ‘buy & build’ strategy.
“These new entrants have increased opportunities for businesses to sell as going concerns, complimenting the existing consolidation market.”
The data also revealed that recurring income was the chosen approach on 65 per cent of offers analysed, with adjusted Ebitda (profit) making up the remaining 35 per cent.
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