Mid-market Argos Index® Q4 2020

Acquisition prices of unlisted European SMEs climbed to a record high 11.1x EBITDA amid a low overall transaction volume.

Paris (France) – 1 March 2021 – Argos Wityu, the independent European investment fund, and Epsilon Research, the online platform for the management of non-quoted M&A transactions, today published the Mid-market Argos Index® for the fourth quarter of 2020. This index, launched in 2006, tracks the valuations of eurozone private, mid-market companies in which a majority stake has been acquired during the last six months.

Acquisition prices of unlisted European SMEs reached a record high.

Argos Index - Argos Wityu

Multiple median EV/EBITDA, 6-mo. rolling basis – Source: Mid-market Argos Index® / Epsilon Research

The Argos Index® reached an all-time high of 11.1x EBITDA as a result of:
  • The outlook for a recovery in economic growth with the development of vaccines effective against Covid-19, despite a second wave of the epidemic and a recession that saw the eurozone’s GDP decline by 7.4% in 2020;
  • Massive intervention on the part of central banks to keep interest rates low for the long-term;
  • Changes in the composition of the index: 65% of the transactions referenced in the fourth quarter were in the non-cyclical healthcare and technology sectors (i.e. 15 percentage points more than in the previous quarter) that have been spared or even favored by the crisis and that present high multiples.
The multiples paid by investment funds exceeded 10x EBITDA for the first time.
  • The multiples paid by investment funds increased significantly, by more than 20% to 11.2x EBITDA, the highest level the Argos Index® has reached since its inception in 2004; they are now higher than the multiples paid by strategic buyers (11.0x EBITDA).
  • Three factors are driving this increase: i) competition from strategic buyers for companies not affected by the crisis is robust, ii) private equity investment continues to rise, and iii) the cost of acquisition debt is low (tied to central bank policy).
Nearly 20% of transactions were closed at multiples in excess of 15x EBITDA.
During the second half of the year, the percentage of transactions with multiples in excess of 15x:
  • Increased briskly to 19% of transactions;
  • Returned to the levels observed in the second half of 2019.
Listed companies were very active and made opportunistic acquisitions.
Large listed companies:
  • Represented 75% of strategic buyers on the mid-market in the second half;
  • Benefited from a favourable market environment and a rise in their valuations;
  • Saw their acquisition multiples advance by 20% this quarter to 10.1x EBITDA, narrowing the gap with strategic buyers as a whole (11.0x EBITDA).
The eurozone’s mid-market M&A segment remained becalmed.
The sharp rise in the Argos Index® came amid low mid-market M&A activity in the eurozone, which:
  • Declined by 15% in volume terms and 36% in value terms in 2020, against the background of a deep economic recession as a result of the Covid-19 pandemic;
  • Declined by 13% q-o-q in the fourth quarter, but rose 47% in value terms, returning to its fourth quarter 2019 level.

Argos Wityu

Coralie Cornet
Head of Communications
+33 6 14 38 33 37

About Argos Wityu / www.argos.wityu.fund
Argos Wityu is an independent European investment fund that supports companies in the transfer of business ownership. It has assisted more than 80 entrepreneurs, focusing its investment strategy on complex transactions with emphasis on transformation, growth, and close collaboration with management teams. Argos Wityu seeks to acquire majority interests and invest between €10m and €100m with each transaction. With more than €1bn under management and 30 years of experience, Argos Wityu operates from offices in Brussels, Frankfurt, Geneva, Luxembourg, Milan and Paris.

Epsilon Research developed the first online platform for the management of non-quoted M&A transactions, aimed at M&A professionals. The Epsilon platform includes data, analysis reports, software and services essential for private company valuation / deal management: 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 comparable private equity fund investments.

The Mid-market Argos Index® tracks the valuation 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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