Mid-market Argos Index® second quarter 2020
Acquisition prices of unlisted SMEs stabilised at 9.2x EBITDA against a background of low transaction volumes
Paris (France) – 23 July 2020 – Argos Wityu, an independent European investment fund, and Epson Research, the online platform for the management of unlisted M&A transactions, today published the Mid-market Argos Index® for the second 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 stabilised in the second quarter at 9.2x EBITDA against a background of low transaction volumes.
The Argos Index® stabilised at 9.2x EBITDA. Multiples did not continue to decline during the second quarter; rather, the softer market conditions were expressed in declining transaction volumes.
Nevertheless, valuation differences increased between transactions in sectors that the crisis has spared (software, healthcare, etc.) and in those it has impacted more directly. The latter have been the target of opportunistic acquisitions at lower valuations.
The index remained stable also because financial terms were still very accommodative, owing to the ECB’s rapid and massive intervention, and because large groups and investment funds had large cash hoards that were available for opportunistic acquisitions.
Convergence of multiples paid by investment funds and strategic buyers.
The multiples paid by buyout capital funds rose slightly to 9.3x EBITDA amid a transaction volume down 35% in the second quarter.
Prices paid by strategic buyers continued to declne, following on from the first quarter, to 8.9x EBITDA. Large, listed companies represented more than 70% of strategic buyers in the first half, to the detriment of small or unlisted groups.
Stable proportion of transactions at high multiples, in excess of 15x EBITDA.
They represented 15% of the transactions carried out during the half-year period.
This means that prices have been particularly resilient for thriving companies, such as those in sectors that are shielded from the impact of Covid-19 (technology, healthcare, etc.).
The spread between the multiples of listed companies and the transaction multiples paid by strategic buyers narrowed.
The multiples of listed companies increased by 9% to 7.4x EBITDA in the second quarter, benefiting from the rapid recovery in equity markets.
The spread between the multiples of listed companies and the transaction multiples paid by strategic buyers reached an historical high in the first quarter of 2020. That spread narrowed in the second quarter.
Sharp volume decline in European mid-market M&A activity
European M&A activity fell by 40% in volume (to 150 transactions) and by 60% in value during the second quarter (vs the first quarter of 2020 and the second quarter of 2019).
Germany remained the most active eurozone country, and its weighting increased to 31% of transactions in the first half of 2020. France advanced more slowly, meanwhile, to 18% of transactions.
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Argos Wityu (www.argos.wityu.fund) 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 €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 comparables, 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).