Acquisition prices for European SMEs back up to 9.5x EBITDA
The mid-market Argos Index® for the third quarter of 2024, 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 the third quarter of 2024, acquisition prices for unlisted eurozone SMEs rose to 9.5x EBITDA. The index was boosted by a progressive recovery in M&A activity and a rebound in LBO transactions in the mid-market (between €15 million and €500 million). Higher prices were driven by the availability of capital and improved funding conditions, against the backdrop of a rapid fall in inflation that prompted the ECB to start a rate-cutting cycle. However, the process is a gradual one because of the major geopolitical uncertainties that remain in place, along with the eurozone’s weak economic growth,” said Louis Godron, Chair of Argos Wityu.
Acquisition multiples for unlisted European SMEs recovered to 9.5x EBITDA in Q3.
- In the third quarter of 2024, the Argos Index® rebounded to 9.5x EBITDA after three years in which it fell steadily from 11.6x to 8.9x EBITDA.
The index was supported by an upturn in multiples paid by investment funds.
- In the third quarter of 2024, multiples paid by investment funds were up significantly, rising 8.6% to 10.1x EBITDA.
- Those paid by strategic buyers rose slightly to 8.8x EBITDA, in line with the rally in listed equities.
- The gap between multiples paid by investment funds and strategic buyers widened to 1.3x EBITDA during the quarter. This confirms the reversal seen since 2021 and the Covid crisis, since when funds have on average paid 0.9x EBITDA more than strategic buyers.
A smaller proportion of transactions took place at extreme multiples.
- In the third quarter of 2024, 39% of transactions took place at extreme multiples, i.e. less than 7x or more than 15x EBITDA. This represents a much smaller proportion than the 48% seen in the previous quarter.
- 22% of transactions analysed had multiples of less than 7x EBITDA, sharply down on the Q2 2024 figure of 31%.
- The proportion of transactions at multiples of more than 15x EBITDA was stable at 17%, while the proportion of those taking place at more than 20x EBITDA rose to 6%.
The recovery in eurozone mid-market M&A volumes continued, led by the LBO market.
- Eurozone mid-market M&A activity rose by 7% compared with the third quarter of 2023. Over the first three quarters of 2024, based on disclosed transactions, the number of deals was up 8% and their value was up 11% year-on-year.
- The upturn was driven by transactions of less than €150 million and by the faster recovery in the LBO market, where the number of deals rose by 30% and their value by 80% year-on-year in the first nine months of 2024. The proportion of LBOs continued to increase: they accounted for 17% of deals in the M&A market in the second and third quarters of 2024, up from 15% in 2023.
Argos Wityu
Coralie Cornet
ccc@argos.fund
+33 6 14 38 33 37
Argos Wityu – One Firm, Two Investment Strategies.
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 €1.8 billion in assets under management, 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 Argos Mid-Market fund helps companies arrange changes of ownership in order to accelerate growth.
- the Argos Climate Action fund (SFDR 9) 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: the EMAT database of European transaction multiples, with detailed analysis of over 10,000 M&A deals covering all industry sectors; indices and studies published regularly by Epsilon, including the Argos Index®; a tool for evaluating the portfolios of private equity funds; cloud-based M&A CRM and project management software; and an online dataroom for SME transactions.
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).
