Acquisition prices of European SMEs declined to 9.1x 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 Mid-market Argos Index® for the 3rd quarter of 2023. 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 3rd quarter of 2023, macro-economic conditions depressed all mid-market segments in the eurozone. Inflation was persistent, the economy slowed, the ECB boosted interest rates – faster than it ever had since the inception of the euro – and there were strong geopolitical pressures. These factors began to peck away at the sale prices of PMEs, as demonstrated by the record-high percentage of sales at multiples below 7x EBITDA”, said Louis Godron, Managing Partner at Argos Wityu.
The acquisition price of unlisted European SMEs declined 8% to 9.1x EBITDA.
- The Argos Index® dropped to 9.1x EBITDA in the 3rd quarter of 2023, after three quarters of relative stability.
- It was down 20% from its record high in the 2nd quarter of 2021 and has fallen to its 1st quarter 2018 level.
Decline and convergence of prices paid by strategic buyers and investment funds.
- The multiples paid by large companies fell to 9.1x EBITDA. In search of growth opportunities, those companies were very active in the M&A market. The economic and financial context was weak, but was offset by the decline in prices.
- Multiples paid by investment funds continued to decline, to 9.4x EBITDA. So did their percentage of the number of transactions and the value of eurozone mid-market M&A activity, which remained at a low of 15%.
Record proportion of transactions below 7x EBITDA
- 44% of transactions took place at the extremes, i.e., at multiples < 7x or > 15x EBITDA.
- This high level came about because transactions at < 7x EBITDA increased sharply. For the first time ever, they represented 30% of transactions analysed.
- The percentage of transactions at multiples > 15x EBITDA fell to 14%, close to its all-time low.
The value of eurozone mid-market M&A activity declined, but the number of transactions held up.
- In the 3rd quarter of 2023, eurozone mid-market M&A activity declined by 11% in value and 14% in volume.
- Over the first three quarters of 2023, activity was down 40% in value, but only 9% in volume, compared with the year-earlier period.
- Once again, the lower mid-market was more resilient in liquidity terms than the upper mid-market, where liquidity continued to be scarce.
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 €1.4bn 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).
