Argos Index® Mid-market Q3 2022

Acquisition prices of European SMEs remained stable at 10.0x EBITDA despite turbulent market conditions.

Paris (France) – 23 November 2022 – Argos Wityu, the independent European investment fund, and Epsilon Research, the online platform for the management of non-quoted M&A transactions, today published the Argos Index® Mid-market for the third quarter of 2022. This index, launched in 2006, tracks the valuations of eurozone private, mid-market companies in which a majority stake has been acquired during the last six months.

“Notwithstanding the deteriorating geopolitical, economic and financial context, eurozone SME acquisition prices remained stable, and this segment’s mergers-acquisitions market was more resilient than the worldwide market. The financial capacity of investment funds to acquire high-quality assets has contributed to stabilising prices and volume”, said Louis Godron, Managing Partner at Argos Wityu.

Acquisition prices of unlisted European SMEs were stable.

Median EV/EBITDA multiple, 6-mo. rolling basis – Source: Argos Index® Mid-market / Epsilon Research
  • In the third quarter of 2022, the Argos Index® remained stable at 10.0x EBITDA, i.e. the average of the last five years.
  • The index’s stability nevertheless masked the spread between the multiples of the high end of the market (still >12x EBITDA) and those of the lower mid-market (down 0.8 points at 8.9x EBITDA).
  • It also contrasted with the worldwide deterioration in geopolitical and financial factors (inflation, interest rates rising at an unprecedented pace, economies teetering on the edge of recession) and stock market turbulence.

Prices paid, both by strategic buyers and investment funds, were stable.

  • Multiples paid by strategic buyers have been stable at 9.9x EBITDA since the fourth quarter of 2021 and have not been affected by the continued slide in equity markets.
  • Those paid by investment funds have also been stable, at 10.7x EBITDA this quarter and remain higher than those paid by strategic buyers. This is because their investments are concentrated on larger, high-quality and therefore higher-valued companies. Funds continued to benefit from record-high amounts of capital looking for investment opportunities and from new financing methods, such as private debt.

The share of transactions at multiples > 15x EBITDA returned to its pre-Covid level.

  • The share of transactions at multiples in excess of 15x EBITDA continued the decline that started in the first quarter of 2022 and returned to its pre-Covid level of 12% of analysed transactions.
  • The share of transactions at multiples below 7x EBITDA represented 16% of the sample, in line with the average of the past five years.

Mid-market European M&A activity declined only slightly, despite the weak market context.

  • This quarter, the lacklustre context had only a moderate impact on the eurozone’s mid-market M&A segment, in terms of both volume (-11%) and price (stable).
  • This segment is showing more resilience than the overall M&A market, which declined 34% in value worldwide and 24% in Europe over the first nine months of 2022.
  • The M&A market is receiving support from LBO transactions, whose share in the overall M&A market reached a record 23% this quarter.

Contact

Coralie Cornet
ccc@argos.fund
+33 6 14 38 33 37

About Argos Wityu / www.argos.wityu.fund
Argos Wityu is an independent European investment fund that supports companies in the transfer of business ownership. It has assisted more than 80 entrepreneurs, focusing its investment strategy on complex transactions with emphasis on transformation, growth, and close collaboration with management teams. Argos Wityu seeks to acquire majority interests and invest between €10m and €100m with each transaction. With more than €1bn under management and 30 years of experience, Argos Wityu operates from offices in Brussels, Frankfurt, Geneva, Luxembourg, Milan and Paris.

Epsilon Research developed the first online platform for the management of non-quoted M&A transactions, aimed at M&A professionals. The Epsilon platform includes data, analysis reports, software and services essential for private company valuation / deal management: EMAT, the largest database of European private company transaction multiples, with detailed analysis of 8,000 M&A deals, ranging from €1m to €500m in value, covering all industry sectors; indices and studies published regularly by Epsilon, including the Argos Index; cloud-based software for managing M&A contacts and projects; valuation of comparable private equity fund investments.

The Mid-market Argos Index® tracks the valuation of unlisted mid-market companies in the eurozone. Carried out by Argos Wityu and Epsilon Research and published every three months, it reflects median EV/EBITDA multiples, on a six-month rolling basis, of transactions meeting the following criteria: mid-market (equity value between €15m and €500m for 100%), target based in a eurozone country, acquisition of a majority stake, certain activities excluded (financial services, real estate, high-tech).

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