Mid-market Argos Index® 2nd quarter 2023

Acquisition prices of European SMEs have stabilised at 9.9x EBITDA

The Mid-market Argos Index® for the 2nd quarter of 2023, published by Argos Wityu, the independent European investment fund, and Epsilon Research, the online platform for the management of unlisted M&A transactions, is now available. Launched in 2006, this index tracks the valuations of eurozone private, mid-market companies in which a majority stake has been acquired during the last six months.

“Acquisition prices for eurozone SMEs stabilised in the 2nd quarter of 2023, against a persistently weak macroeconomic background, after trending downwards since their peak two years ago. This came about because the market saw renewed interest from strategic buyers, whose acquisition prices began to rise. In addition, transaction prices were more concentrated than ever on the extremes, on the upside as well as on the downside”, said Louis Godron, Managing Partner at Argos Wityu.

Acquisition prices of unlisted European SMEs stabilised after several quarters of decline.

Median EV/EBITDA multiple on a six-month rolling basis – Source: Argos Index® Mid-market / Epsilon Research
  • In the 2nd quarter of 2023, the Argos Index® rose slightly and stabilised at 9.9x EBITDA. It lay below its average of 10.2x EBITDA over the last five years and was 1.7x EDITDA below its all-time high in the 2nd quarter of 2021.
  • As in the 1st quarter, the market remained highly polarised. Although the spread between the upper mid-market and lower mid-market multiples narrowed by 3.6x EBITDA, it remained very high.

The index held up because prices paid by strategic buyers rose.

  • Multiples paid by strategic buyers climbed back to 9.6x EBITDA for two reasons: listed stock markets have recovered since the start of 2023, and buyers are pursuing attractive growth opportunities aimed at transforming their business models.
  • Multiples paid by investment funds continued their gradual decline, dipping 1% to 10.3x EBITDA, while the number of LBO transactions fell by 22% during the 1st half of 2023, compared with the previous six months, reflecting the continued rise in interest rates.

Record level of transactions at extreme multiples

  • 48% of transactions took place at multiples < 7x or > 15x EBITDA, a record level.
  • 22% of transactions were realised at multiples > 15x EBITDA, an increase compared with the five previous quarters, and 26% at multiples < 7x EBITDA.

Eurozone mid-market M&A activity has stabilised at a low level.

  • Mid-market M&A activity in the eurozone declined by 30% in value and 15% in volume during the 1st half of 2023, compared with the previous six months, driven by the decline in the upper mid-market (€150-500m), which coincided with a decline in the worldwide M&A market.
  • Nevertheless, activity stabilised this quarter (transactions up 2% in volume, 32% in value), underpinned by smaller transactions, which were more resistant and less volatile.
  • The share of private equity funds continued to decline during the 2nd quarter, to less than 15% in volume and in value, an all-time low.

Antoinette Darpy

Agence toBnext – adarpy@tobnext.com
+33 (0)6 72 95 07 92

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 €1.4bn 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 €10m and €100m per investment in its two strategies:

– The Mid-market fund helps companies implement capital transfers to accelerate growth.

– The Climate Action fund 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. This 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 €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 comparables, private equity fund investments.

The Mid-market Argos Index® tracks valuations 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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