City valuations soar to 'dotcom levels'

PRIVATE companies are being valued at prices not seen since the heyday of the dotcom boom in 2000.

BDO Stoy Hayward's Private Company Price Index, which charts the average price-earning ratio of private company sales, rose to 14.5 during the final quarter of 2004, the highest it has been since the chart hit 14.8 in mid-2000.

The increase reflects the upturn in acquisition activity in the UK, which doubled in value during 2004 to £133bn as confidence returned to the boardroom.

The index showed the value of private companies is edging closer to that of comparative companies listed on the stock exchange. BDO's corporate finance partner Jon Breach said this gap could narrow further this year as private equity cash drives up company prices. He said the return of trade buyers to the market is has given it even more momentum.

Breach added: 'There is a lot of private equity money currently in the market which is contributing to these favourable conditions and this money is chasing the very best deals. Trade buyers know they have to pay top prices if the are to compete successfully for acquisitions.

'Private companies which have a profitable track record, established management teams and are well positioned in growth sectors can look forward to very attractive multiples when they sell in the current market.'

Today's BDO Stoy Hayward research comes as more companies unveil plans for listings on the stock market as confidence in the City picks up.

At the weekend, it emerged that Endemol, the production company behind Big Brother, could announce a share offering by the end of the summer. Endemol is currently owned by Spanish telecoms giant Telefonica, which is understood to have instructed advisers Merrill Lynch to prepare for a listing.

Separately, restaurant chain Pizza Express was reported to be in line for a return to the stock market less than two years after it was taken private.

The owner of Pizza Express, private equity group TDR Capital, which acquired the chain for £278m in partnership with Capricorn Ventures, is thought to be looking to appoint bankers to advise on the strategic options for the business.

These options include a flotation or a sale, while a combination of Pizza Express and the Ask Central chain that was acquired by TDR and Capricorn last year for £213m is also possible.