Acquisition prices of non-quoted European SMEs has stabilized on a record high level

!#!22/05/2019 – France – Press Release!#!

Paris, May, 22, 2019 

Argos Wityu, independent pan-European investment company, and
Epsilon Research, online platform for the management of non-quoted M&A transactions,
publish today the Argos Index® mid-market for the 1st quarter 2019. Since its launch in 2006,
this index measures the evolution of Eurozone private mid-market company valuations for
which a majority stake has been acquired by a private equity fund during the last 6 months.
In the 1st quarter 2019, Argos Index® mid-market has stabilized at 10.1x EBITDA, its historical
This stability conceals a divergence between the continued increase in multiples paid by strategic buys, to 11.0x EBITDA, and the decline in multiples paid by private equity funds to 9.3x EBITDA – which is still considered a high multiple.

There is also a sharp contrast with quoted mid-market multiples: despite their increase to 8.5x
EBITDA in the first quarter1, with the fast recovery in the stock market indices2, they are very
out of sync with the Argos Index® mid-market. All in all, the significant stock market correction
in the fourth quarter of 2018 did not have a measurable impact on the unquoted prices.
Despite the prospect of monetary easing by the ECB, the uncertainties about European growth
and the political tensions linked to Brexit have disrupted M&A activity in Europe this quarter.
In the first quarter M&A Mid-Market activity in the Eurozone dropped by 12% in volume and
30% in value compared to the previous quarter, to return to the same level as the second
quarter of 2018.

The continued high level of the Argos Index® mid-market is explained by the stronger appeal
for unquoted companies: investors3 looking for returns4 ; large quoted groups, in the search
for growth and which represented more than 2/3 strategic buyers this quarter.
In the second half of the year, prices of private companies have seen their own momentum,
independent of the evolution of stock markets (3). This is influenced by the record levels of
cash, held by large corporations or raised by private equity firms investing in private nonquoted
companies, by the need of strategic buyers to rely on acquisitions to find growth
sources as well as the ever-increasing attraction of non-quoted companies for institutional
investors (4), looking for returns, and which reflects the continuing increases in amounts raised
by private equity firms and the levels of dry-powder.
(1) Source: Infront Analytics
(2) EURO STOXX® TMI Small Index increased by 13% in the first quarter 2019
(3) Fundraises predicted in 2019 in private equity are $1 trillion according to Preqin, vs. $432 billion in 2018.
(4) Between 2004 and 2018, private equity outperformed quoted markets by 530bp, at 14.2% per year (SuperReturn
Conference in Les Echos

About Epsilon Research

Epsilon Research developed the first online platform for the management of non-quoted M&A transactions, aimed at professionals: M&A advisers, private equity funds, valuators, corporates. The Epsilon Platform includes data, analysis reports, software tools and services essential to 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, such as the Argos Index;
  • Cloudbased software for M&A contacts and project management (“M&A CRM Suite”); and for valuation projects (comparables, private equity fund portfolios).

About Argos Index® mid-market

The Argos Mid-Market Index measures the evolution of euro zone private Mid-Market company valuations. Carried out by Epsilon Research for Argos Wityu and published every three months, it reflects median EV/EBITDA multiples, on a six-month rolling basis, of Mid-Market M&A transactions in the euro zone. The sample of transactions is selected using the following criteria: acquisition of a majority stake, target based in a euro zone country, Mid-Market (equity value in the €15m-€500m range), certain activities excluded (financial services, real estate, high-tech), availability of relevant target financial data.

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