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Main Conclusions
The Argos Index® continued to rise, to 11.3x EBITDA.
The Argos Index® rose to 11.3x EBITDA, a new all-time high.
This quarter, it was driven by the high end of the mid-market (€150-500m in equity) and by investment funds, whose multiples reached a new record.
Progress in vaccination, continued low, long-term interest rates and the unbroken rise in equity markets fueled the outlook for a return to growth in the eurozone, and valuations benefited therefrom.
The high multiples also reflected the composition of the sample, as they did in H2 2020. Nearly 50% of transactions referenced in the Argos Index® in Q1 2021 were in the healthcare and technology sectors, although this percentage was down from the previous quarter.
Argos Index® mid-market Median EV/EBITDA multiple on a six-month rolling basis
Source: Argos Index® mid-market / Epsilon Research
Investment funds paid significantly higher multiples
The multiples paid by investment funds continued to increase significantly, to 12.7x EBITDA, the highest level the Argos Index® has reached since its inception in 2004.
Three factors are driving the increase in multiples: (i) competition from strategic buyers is robust, (ii) private equity investment is continuing its steady rise (also driven by high levels of dry powder), and (iii) the cost of acquisition debt is low (tied to central bank policy).
In Q1 2021, the multiples paid by investment funds were more homogeneous than those paid by strategic buyers, hence, inferring an increase in multiples over all industries; the relative standard deviation for the first group was 25%, vs 40% for the second. The profile of companies acquired by funds was also more homogeneous: high-quality companies, relatively unaffected by the crisis. Strategic buyers were more active in opportunistic acquisitions of lower-valued target companies. The five lowest multiples in the sample, <7.5x EBITDA, were all strategic acquisitions.
Argos Index® mid-market Median EV/EBITDA multiple on a six-month rolling basis
Source: Argos Index® mid-market / Epsilon Research
Share of transactions at multiples >15x EBITDA remained high, at around 16%
Percentage of transactions at multiples >15x EBITDA Argos Index® sample
Source: Argos Index® mid-market / Epsilon Research
Listed companies remained active in the mid-market, buoyed by the steady rise in equity markets
1 The EURO STOXX® TMI was up 9.5% in Q1 2021 and more than 50% year-on-year
2 EV/TLM EBITDA was 10.1x for listed, eurozone mid-market companies (source: smallcaps.infrontanalytics.com)
Source: Mid-market Argos Index® / Epsilon Research / InFront Analytics
Mid-market M&A activity increased in value but not in volume
Eurozone mid-market activity (€15-500m) in volume and value
Source: Epsilon Research / Market IQ
Benelux was the most active eurozone region this quarter in terms of SME acquisitions, surpassing Germany
Average disclosed transaction size – M&A Eurozone mid-market
Source: Epsilon Research / Market IQ
