Acquisition prices of European SMEs declined slightly, to 8.9x EBITDA
Argos Wityu, the independent European investment fund, and Epsilon Research, the online platform for the management of unlisted M&A transactions, have today published the Argos Index® Mid-market for the 1st quarter of 2024. Launched in 2006, this index tracks the valuations of private, eurozone mid-market companies in which a majority stake has been acquired during the last six months.
“In the first quarter of 2024, acquisition prices for unlisted, eurozone SMEs declined slightly, to 8.9x EBITDA. This decline was driven by the decrease in multiples paid by investment funds. Specifically, the proportion of transactions at less than 7x EBITDA rose to a record level, in a market where prices in the upper and lower segments of the mid-market are still converging. The economic environment is favourable. Inflation is declining sharply, and interest rates, although still high, are stabilising. The economy is still hindered, however, by geopolitical risks and delays in interest rates cuts anticipated by the financial markets”, said Louis Godron, Managing Partner at Argos Wityu.
Acquisition prices of unlisted, European SMEs declined slightly, to 8.9x EBITDA
Median EV/EBITDA multiple on a six-month rolling basis – Source: Argos Index® Mid-market / Epsilon Research
- In the 1st quarter of 2024, the Argos Index® was down slightly, at 8.9x EBITDA, and has been declining since reaching a peak two and a half years ago, in the 2nd quarter of 2021. The index has reached its lowest level since 2017 and is near its 20-year historical average.
- The price decline was highlighted by the drop in multiples on the upper mid-market (down by 4x EBITDA since Q1 2023), which continued to converge with lower mid-market multiples.
Multiples paid by investment funds are pulling the index down
- Multiples paid by investment funds were down 3% this quarter to 9.1x EBITDA and moved closer to multiples paid by strategic buyers. Nevertheless, investment funds increased their market share and continued to use their record dry powder to acquire high-quality assets.
- Multiples paid by strategic buyers remained stable at 8.7x EBITDA, while equity markets continued to recover.
Record proportion of transactions below 7x EBITDA
- 47% of transactions took place at the extremes, i.e. at multiples < 7x or > 15x EBITDA, one of the highest levels since 2018.
- 34% of transactions took place at < 7x EBITDA, a record level, reflecting downward pressure on prices.
- The proportion of transactions at multiples > 15x EBITDA remained stable at a low level, with no multiples at 20x.
Mid-market eurozone M&A activity remained stable, following a limited decline in 2022/2023
- Eurozone M&A deal volume was stable and down 8% in value terms. The proportion of LBOs increased and represented 18% of M&A market transactions.
- Depending on economic conditions, mid-market M&A is less volatile than its worldwide large-cap counterpart, which is recovering and posted a limited decline in activity in 2022/2023.
Contact
Coralie Cornet
ccc@argos.fund
+ 33 6 14 38 33 37
Argos Wityu is an independent European private-equity group supporting the growth of SMEs and mid-caps and their management teams. It has more than €1.8 billion in assets under management, over 30 years of experience, has supported more than 90 companies 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 investment via its two strategies:
- The Mid-Market fund helps companies arrange changes of ownership in order to accelerate growth.
- The Climate Action fund (SFDR 9) 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: EMAT, the largest database of European private-company transaction multiples, with detailed analysis of 8,000 M&A deals, ranging from €1 million to €500 million in value, covering all industry sectors; indices and studies published regularly by Epsilon, including the Argos Index®; and cloud-based software for managing M&A contacts and projects and valuation projects involving comparable companies and private-equity fund investments.
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 meeting the following criteria: mid-market deal (equity value between €15 million and €500 million for 100%), target based in a eurozone country, acquisition of a majority stake, certain activities excluded (financial services, real estate, high-tech).
