Business valuations for IFA and financial planning firms grew by more than 20% in 2022, despite interest rates increasing on nine occasions during the year, according to deal analysis from Gunner & Co.
Recurring income multiples, which continue to be the most common approach to valuation, grew from an average of 3.4X n 2021 to 4.1X in 2022. Profit multiples, which account for around 35% of valuation approaches, grew from an average of 6.9X in 2021 to 8X in 2022.
Spurred on 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) The biggest winners in 2022 were Perspective, announcing 12 deals and Kingswood, with 10. Whilst deal volumes for the year were largely the same as 2021, Gunner & Co.’s analysis on deal size has found the average deal value for 2022 increased by 17%.
“Despite a choppy year for the markets and consecutive interest rate hikes, the M&A market has continued to grow,” said Louise Jeffreys, MD of Gunner & Co. “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.”
“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,” added Jeffreys.
