Prices held up for companies selling in the rush to beat the April 5 capital gains tax deadline, according to research from accountants BDO Stoy Hayward.
Private equity multiples fell back to match those being paid by trade buyers.
The latest Private Company Price Index, which tracks price/earnings multiples paid by trade buyers for private companies, held steady in the first quarter showing a marginal increase over the previous three months, rising from 12.9 times to 13.2 times.
Meanwhile the Private Equity Price Index showing comparable multiples on sales to private equity buyers was pegged back to 12.9 times, falling by 16 per cent from 15.4 times in the last quarter of 2007 as private equity houses struggled to raise bank debt for new investment.
The research shows that public company multiples have also declined.
The trading p/es of companies in the FTSE Non-Financials Index were 12.8 times their historic after tax profits, down eight per cent from 14 times in the final quarter of 2007 and 19 per cent from 15.8 times in Q1 2007.
The convergence of multiples across all three indexes means that the premiums that were being paid by private equity buyers are a now thing of the past.
It was always predicted that there would be a surge in deals before April 5 as vendors rushed to beat the CGT deadline.
While market turbulence has meant that deal volumes have fallen back from the heady levels of M&A activity in 2006 and 2007, the volume of completions in the first quarter, at 791 deals, remained significantly higher than levels seen in 2004 and 2005.
However, deals involving private equity have been the most affected by the credit crunch with just 129 completing compared to a quarterly average of 159 over the last four years - a 19 per cent drop.
Had it not been for the CGT deadline, volumes would almost certainly have been lower as sale processes were accelerated to beat the deadline. Deal volumes are set to decrease further in the next quarter.
Roger Buckley, partner at BDO Stoy Hayward, said: "A fall in deal multiples, not just in private equity, but across the board, was widely anticipated given the current credit crisis.
"However, our figures show that for those deals that completed in advance of the CGT deadline, vendors managed to hold out for full prices from trade buyers. Given the scarcity of bank debt to fund deals, private equity buyers lost market share as they were no longer able to pay a premium in order to trump trade buyers.
"A number of deals did not complete before the deadline as vendors stood firm in the face of buyers seeking to reduce prices. Given the continuing decline in public company ratings and with no sign of the credit market easing, we may now see a period where both buyers and vendors take stock and await some clarity on market conditions.
"The credit-fuelled froth of the last two years has been blown away. However M&A volumes and prices remain at levels above those seen in 2005. Certainty of ability to complete deals will now be key to vendors, meaning that those buyers sitting on cash, who don't have to rely on raising debt and can therefore move quickly, will be very well placed to secure deals."
