Acquisition prices for European SMEs stabilised at 9.0x EBITDA
The mid-market Argos Index® for the fourth 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 unlisted eurozone SMEs in which a majority stake has been acquired during the last six months.
“In 2023, acquisition prices for unlisted eurozone SMEs fell by 10%. Adverse economic conditions—inflation, rising interest rates, slowing growth and geopolitical tensions—led to lower prices and activity levels in the M&A market. In the fourth quarter, however, M&A prices and activity stabilised as inflation and long-term interest rates fell,” said Louis Godron, Managing Partner of Argos Wityu.
Acquisition prices for unlisted European SMEs stabilised at 9.0x EBITDA.
Median EV/EBITDA multiple on a six-month rolling basis—Source: mid-market Argos Index® / Epsilon Research
- In the fourth quarter of 2023, the Argos Index® stabilised at 9.0x EBITDA, after falling to 9.1x EBITDA in the previous quarter. The index is now close to its 20-year average.
- Prices are continuing to converge between market segments. The differential between the upper and lower segments of the mid-market has hit a low of 1.5x EBITDA.
Further decline in prices paid by companies and stabilisation in prices paid by funds.
- Multiples paid by large companies fell by a further 4% in the fourth quarter to 8.7x EBITDA, despite the rally in equity markets. Companies seeking transformative acquisitions and low-priced buying opportunities continued to account for a large proportion of M&A deals (85%).
- Multiples paid by funds remained stable at 9.4x EBITDA despite high borrowing rates, due to the record amount of available capital.
High proportion of transactions below 7x EBITDA.
- 40% of transactions took place at extreme multiples, i.e., less than 7x or more than 15x EBITDA. Although the percentage fell in the fourth quarter, it remained high.
- 28% of transactions took place at multiples of less than 7x EBITDA, a very high proportion that highlights the downward pressure on prices.
- The proportion of transactions at more than 15x EBITDA continued to fall to 12%.
Resilient activity levels in eurozone mid-market M&A.
- In the fourth quarter of 2023, eurozone M&A activity—in terms of both the number deals and their total value—moved back to second-quarter levels, while the number of mid-market LBO deals rebounded by 20%.
- That upturn took place against the background of a global M&A market in which the value of deals fell by 17% in 2023 to a 10-year low, with the sharpest drop taking place in Europe (-28%). Eurozone mid-market M&A activity also declined (-10% in terms of the number of deals and -25% in terms of their total value), while mid-market LBO activity followed the same trend (-12% and -30% respectively).
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 €1.7 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 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).
