Argos Index®

The mid-market reference

Argos Index® 4th Quarter 2021

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Main Conclusions




The Argos Index® continued to correct, returning to its multi-year average of 10.0x EBITDA.

In the fourth quarter of 2021, the Argos Index® continued to correct, declining 9% from the previous quarter to 10.0x EBITDA. This level, which corresponds to the average of the last five years (2017-21), is still historically high.

The decline was observed across all market segments. The multiples investment funds and industry players paid on the upper and lower mid-market converged towards 10x EBITDA.

Although there seems to be little disparity in multiples, the market actually remained polarised across business sectors. The relative standard deviation of the index remained in excess of 50%, and the spread of multiples between tech-healthcare and manufacturing-services is very significant, at more than 4x EBITDA on average.

With the M&A market still active, acquisitions continued to gain momentum in manufacturing and services, reinforcing the decline in the index. As in the previous quarter, these sectors represented more than 60% of the sample, which returned to its pre-Covid sectoral composition.

The Argos Index® remained high as the M&A cycle continued to ramp up, driven by the sharp economic recovery and the very low interest rates central banks have maintained. But the index’s fourth quarter decline also reflected concerns about the consequences of the successive Covid-19 waves, the breakdown of value chains, the sharp rise in energy and raw materials prices and the likelihood of renewed inflation.

Argos Index® mid-market Median EV/EBITDA multiple on a six-month rolling basis
Source: Argos Index® mid-market / Epsilon Research




More market coherence, with convergence in the multiples paid by investment funds and strategic buyers

Multiples paid by investment funds declined by 11.5% this quarter to 10.0x EBITDA. They continued the correction they started in the third quarter after reaching a record level in the second quarter. As in the previous quarter, transactions were less focused on healthcare and technology, and this had a direct impact on multiples. The number of transaction remained high, however, driven by exceptional financing conditions and an abundance of capital looking for investments. Multiples approached those paid by strategic buyers, with competition on high-quality assets remaining intense.

Argos Index® mid-market Median EV/EBITDA multiple on a six-month rolling basis
Source: Argos Index® mid-market / Epsilon Research




More dispersion in multiples

The share of transactions with multiples higher than 15x EBITDA continued to increase in the fourth quarter of 2021 to a new record of 26% of analysed transactions.
Percentage of transactions at multiples >15x EBITDA Argos Index® sample Source: Argos Index® mid-market / Epsilon Research
The dispersion of multiples within the sample was high and related in particular to the business sector. The share of transactions at multiples of less than 7x EBITDA represented 15% of analysed transactions.
Percentage of transactions at multiples <7x and >15x EBITDA Argos Index® sample Source: Argos Index® mid-market / Epsilon Research




Listed companies were once again very active in the mid-market, although their multiples declined this quarter.

Multiples paid by strategic buyers were down this quarter, at 9.9x EBITDA* even though M&A activity, particularly that of large groups, remained buoyant. Large groups represented 72% of strategic buyers in the second half.

This decline was in line with that of the multiples of listed companies, at 9.2x EBITDA1 this quarter. Equity markets stabilised** at the end of the year at record-high levels, with an increase in 2021 operating earnings.

In many sectors, large companies continued to transform their business models and their approach to strategic acquisitions, against a very supportive economic and financial background.

* EV/LTM EBITDA was 9.2x for listed, eurozone mid-market companies (source: smallcaps.infrontanalytics.com)
** The EURO STOXX® TMI was up 2.8% in Q4 2021 and rose 1.9% in the third quarter.
Comparison of listed and unlisted mid-market multiples (paid by strategic buyers)
Source: Mid-market Argos Index® / Epsilon Research / InFront Analytics




The volume of mid-market M&A activity remained high

M&A activity increased by 2% in volume in the fourth quarter and remained at a high level. It declined by 13% in (declared) value, however, in line with the decline in average transaction amounts (€83m vs €104m in the third quarter).

Mid-market transactions did not increase as much as overall M&A activity, which returned to an upward cycle this year. Driven by the largest acquisitions, the worldwide market grew by more than 60% in volume in 2021 to $5.8tn*, the highest level in 40 years.

While large groups were very active, the unstable economic environment prompted mid-market companies to be more cautious, as they saw a strong recovery and a rapid rise in energy prices that could signal a return to inflation, combined with successive waves of Covid-19.

* Source: Refinitiv in the FT, 31.12.2021
Comparison of listed and unlisted mid-market multiples (paid by strategic buyers)
Source: Mid-market Argos Index® / Epsilon Research / InFront Analytics
With the gradual recovery in M&A transactions in the manufacturing and services sectors, the average size of mid-market transactions declined in 2021 to €83m in the fourth quarter.

Argos Index® 4th Quarter 2021

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Jean Pierre Di Benedetto

Managing Partner

ITALY

Giuseppe Bonsignore

COO

ITALY

Paris

Louis Godron

Managing Partner

FRANCE

karel Kroupa

Managing Partner

FRANCE

Gilles Lorang

Managing Partner

BENELUX

Coralie Cornet

Head of communications

FRANCE

Jacqui Darbyshire

Chief Financial Officer

FRANCE

Foodservice industry

Revennues : 50M€

FRANCE

Foodservice industry

Revennues : 40M€

ITALY

Foodservice industry

Revennues : 30M€

FRANCE