The index is picking up again, driven by buyout funds
The Argos Mid-Market Index picked up again in the third quarter of 2015 to 8.5x EBITDA and is drawing closer to its all-time high from the second half of 2006. The index is driven by the rapid increase in prices paid by private equity funds to 9.0x EBITDA, while the multiples paid by trade players fell to 8.0x.
The ongoing rise in multiples over the past three years is rather explained by a persistent imbalance between supply and demand:
– On the one hand, competition is still fierce between private equity funds and strategic buyers for quality assets, bolstered by the historically high cash level (dry powder) the funds have available, and the same holds for trade buyers;
– On the other hand, the number of quality companies on the market is limited, as many have not recovered from the financial crises in 2007/08 and 2011/12 and the long period of economic stagnation that has followed.
Eurozone Mid-Market M&A activity fell markedly in the third quarter of 2015 (-10% in volume and -20% in value), and returned to its first quarter level. Over the first three quarters of 2015, activity fell 6% in volume terms and 9% in value terms compared with 2014. This trend was similar in the two market segments (€15m-€150m and €150m-€500m).
« In the current environment – strong volatility of the stock market, low growth perspectives in the medium term, significant amount of cash held by strategic buyers and buyout funds – both types of buyers (strategic and financial) show a real selectivity in their acquisition plans » remarks Gilles Mougenot, President of Argos Wityu Partners .
About Argos Wityu
Argos Wityu is an independent European private equity group with offices in Paris, Milan, Brussels and Geneva. Since its creation in 1989, Argos Wityu has carried out more than 60 transactions focusing on management buy-outs and buy-ins in small and medium companies. Argos Wityu typically takes majority stakes ranging from €10m to €60m in companies with revenues of €20m to €400m.
With €675m under management, the firm has developed a track record of unusual, complex and off market transactions where the firm’s combination of local presence and international experience is able to add value to the small and medium-sized businesses it invests in.
About Epsilon Research
Epsilon Research developed the first online platform for the management of non-quoted M&A transactions, aimed at professionals: M&A advisers, private equity funds, valuators, corporates. The Epsilon Platform includes data, analysis reports, software tools and services essential to private company valuation / deal management:
(1) EMAT, the largest database of European private company transaction multiples, with detailed analysis of 6,000+ M&A deals, ranging from €1m to €500m in value, covering all industry sectors; (2) Indices and studies published regularly by Epsilon, such as the Argos Index; (3) Cloud-based software for M&A contacts and project management (“M&A CRM Suite”); and for valuation projects (comparables, private equity fund portfolios).
About the Argos Mid-Market Index
The Argos Mid-Market Index measures the evolution of European private Mid-Market valuations. Based on the median of historical EV/EBITDA multiples, on a six-month rolling basis, it is carried out by Argos Wityu and Epsilon Research, and published every three months. The transaction sample fulfils the following criteria:
- Mid-Market companies (equity value between €15m and €500m),
- Target based in a euro zone country,
- Acquisition of a majority stake,
- Specific industries excluded (financial services, real estate, high-tech).
Next Argos Mid-Market Index: Thursday February 18th, 2016
Argos Wityu Contacts : Gilles MOUGENOT, Raphaël BAZIN
Press : Sonia Popoff, email@example.com, Tél. +33 1 53 67 20 50
Epsilon Research Contact : Grégoire BUISSON, firstname.lastname@example.org, Tél. +33 1 47 70 30 24