Acquisition prices for European SMEs up further to 9.8x EBITDA
The mid-market Argos Index® for the fourth quarter of 2024 – published by Argos Wityu, the independent European investment fund, and Epsilon Research, the online platform for the management of unlisted M&A transactions – is now available. Launched in 2006, this index tracks the valuations of unlisted eurozone SMEs in which a majority stake has been acquired during the last six months.
“In the fourth quarter of 2024, acquisition prices for unlisted eurozone SMEs rose again to 9.8x EBITDA. The index was boosted by a further recovery in M&A activity (except in France) and by good momentum in LBO transactions in the mid-market (between €15 million and €500 million), supported by a high level of exits by funds. The increase was underpinned by lower inflation and interest rates, including expected ECB rate cuts, along with a lower cost of capital and easier access to financing. However, the recovery in the index remains slow because of weak growth forecasts, political turmoil and geopolitical threats,” said Louis Godron, Chair of Argos Wityu.
Acquisition prices for unlisted European SMEs up further to 9.8x EBITDA
Median EV/EBITDA multiple on a six-month rolling basis – Source: mid-market Argos Index® / Epsilon Research
- In the fourth quarter of 2024, the Argos Index® continued its recovery to 9.8x EBITDA, up 3% from Q3.
Argos Index® being driven higher by both investment funds and strategic buyers
- In the fourth quarter of 2024, multiples paid by investment funds were up 2% to 10.3x EBITDA.
- Multiples paid by strategic buyers also rose to 9.3x EBITDA despite the decline in public equity markets.
- The gap between multiples paid by investment funds and strategic buyers remained wide at 1.0x EBITDA. The average EBITDA margin of companies acquired by funds was 20% vs. 18% for strategic buyers in S2 2024.
Continued decrease in transactions at extreme multiples
- In the fourth quarter of 2024, 33% of transactions took place at extreme multiples, i.e. less than 7x or more than 15x EBITDA, which is a smaller proportion than the average seen in the last five years. That proportion has fallen very significantly as activity levels and multiples in the M&A market have recovered.
- Transactions at multiples below 7x EBITDA accounted for 20% of analysed transactions, back to their 2021/2022 level.
- The proportion of transactions at multiples of more than 15x EBITDA fell to 13%, while the proportion of those taking place at more than 20x EBITDA also fell to 3%.
Index also buoyed by the recovery in mid-market M&A activity and by the LBO market
- Mid-market M&A activity in the eurozone continued to recover, rising by 13% in volume terms and 14% in value terms in 2024 compared with 2023.
- The upturn was driven by the global recovery in the M&A market, in which companies and investment funds took a more active approach after three years of decline.
- At the same time, the LBO market also continued the upturn that began in the first half of 2023, growing by 22% in volume terms and 65% in value terms in 2024. That growth was fuelled by the sharp rebound in fund exits, with deal numbers up 40% in 2024 vs. 2023.
M&A activity in France: a special case
- In France, political turbulence arising since the July 2024 elections have created particularly difficult conditions for mid-market M&A transactions. In 2024, deal volume in France dropped by 15% while increasing by 16% in the rest of the eurozone. Given the time lag for transactions, the impact on valuations remains limited at this stage.
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Argos Wityu argos.wityu.fund – One company, two strategies
Argos Wityu is an independent European private-equity group that supports the growth of SMEs and mid-caps and their management teams. It has €2 billion in assets under management and 30 years of experience, has supported more than 90 companies so far and operates from offices in Amsterdam, Brussels, Frankfurt, Geneva, Luxembourg, Milan and Paris. The group seeks to acquire majority interests and invests between €10 million and €100 million per deal via its two strategies: i) The Argos Mid-Market fund helps companies arrange changes of ownership in order to accelerate growth. ii) The Argos Climate Action (SFDR article 9) fund aims to shape sustainable European leaders by facilitating their grey-to-green transition.
Epsilon Research has developed the leading professional online platform for the management of unlisted M&A transactions. The platform includes data, analysis reports, software tools and services that are essential for evaluating and managing unlisted investments: The EMAT database of European transaction multiples, with detailed analysis of over 10,000 M&A deals covering all industry sectors; indices and studies published regularly by Epsilon, including the Argos Index®; a tool for evaluating the portfolios of private equity funds; cloud-based M&A CRM and project management software; and an online dataroom for SME transactions.
The mid-market Argos Index® tracks valuations of unlisted mid-market companies in the eurozone. Compiled by Argos Wityu and Epsilon Research and published every three months, it shows the median EV/EBITDA multiple, on a six-month rolling basis, of transactions that meet the following criteria: mid-market deal (100% equity value between €15 million and €500 million), target based in a eurozone country, acquisition of a majority stake, certain activities excluded (financial services, real estate, high tech).
