Proactive Investors - Publicly traded companies offer better value right now than the private sector — that’s the verdict of a majority of private equity investors polled in a study by the investment banking arm of Numis Corporation PLC (LON:NUM).
The study by Numis Securities, which polled 200 senior private-equity professionals who invest in the UK mid-market, is the latest testament to a gaping disconnect between high private company valuations and comparably cheap publicly listed companies.
In Numis’s latest UK mid-market private equity outlook for 2023, private equity executives concluded that private assets are “overvalued” compared to listed companies.
More than half of those polled in September, 53%, said private assets were overvalued. That compares to just 37% who thought PLCs were overpriced.
The result may come as no surprise. Indeed, it emerged last month that the Financial Conduct Authority is preparing to launch a review of how private equity funds assess private market valuations.
A majority of the investors polled, 85%, said the UK market was more attractive than other markets, though that was fewer than had said the same last year (91%).
Regulatory tailwinds are making UK-listed companies increasingly attractive to private equity investors. A third (33%) cited regulation as a key draw for investing in UK PLCs, up from 29% last year.
Investors are particularly drawn to the depressed valuations on offer in the UK mid-market (29% cited low valuations as the main attraction of assets in Britain, up from 12% in 2022).
Valuations so far this year have been the lowest since before Covid-19, according to a recent study by stockbroker Peel Hunt (LON:PEEL).
Its analysis showed the average price paid by a private investor for a publicly traded company, in a ‘take-private’ acquisition, between April and June was about a quarter of the average price paid over the last two years.