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Quarterly Edition, Q1 2019_____________________
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Argos Index® mid-market
Evolution of Euro Zone Mid-Market Private Company Prices - Quarterly Index carried out by Epsilon Research
Acquisition prices of non-quoted European SMEs has stabilized on a record high level of 10.1x EBITDA
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 record. 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)
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Argos Mid Market Index - Sample Analysis
| H2 2015 | H1 2016 | H2 2016 | H1 2017 | H2 2017 | H1 2018 | H2 2018 | Q1 2019 | ||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Sample Size | |||||||||||||||||||||||||||||||
| # deals retained for the index | 100 | 92 | 104 | 85 | 89 | 92 | 105 | ||||||||||||||||||||||||
| Average Equity Value (€m) | 109.2 | 134.6 | 128.5 | 149.7 | 140.5 | 142.0 | 115.7 | ||||||||||||||||||||||||
| Average N-1 sales (€m) | 120.8 | 158.4 | 133.3 | 131.2 | 113.3 | 130.0 | 112.0 | ||||||||||||||||||||||||
| N-1 EBITDA margin | 15% | 14% | 12% | 15% | 14% | 13% | 15% | ||||||||||||||||||||||||
| N-1 EBIT margin | 10% | 9% | 9% | 8% | 12% | 8% | 8% | ||||||||||||||||||||||||
| Breakdown by size (equity value) | |||||||||||||||||||||||||||||||
| [15-49] €m | 42% | 25% | 37% | 27% | 25% | 28% | 36% | ||||||||||||||||||||||||
| [50-99] €m | 29% | 29% | 15% | 18% | 18% | 21% | 20% | ||||||||||||||||||||||||
| [100-150] €m | 6% | 17% | 12% | 13% | 22% | 16% | 18% | ||||||||||||||||||||||||
| Breakdown by deal type | |||||||||||||||||||||||||||||||
| Acquisition | 22% | 35% | 69% | 65% | 67% | 26% | 71% | ||||||||||||||||||||||||
| LBO | 78% | 65% | 31% | 35% | 33% | 74% | 29% | ||||||||||||||||||||||||
| Breakdown by country | |||||||||||||||||||||||||||||||
| France | 25% | 34% | 28% | 35% | 28% | 32% | 34% | ||||||||||||||||||||||||
| Germany | 15% | 16% | 20% | 14% | 13% | 15% | 20% | ||||||||||||||||||||||||
| Italy | 24% | 26% | 13% | 15% | 19% | 14% | 15% | ||||||||||||||||||||||||
| Benelux | 17% | 4% | 13% | 12% | 11% | 13% | 15% | ||||||||||||||||||||||||
| Spain | 9% | 7% | 13% | 11% | 14% | 4% | 6% | ||||||||||||||||||||||||
| Other (euro zone) | 10% | 13% | 13% | 13% | 15% | 22% | 10% | ||||||||||||||||||||||||
| Breakdown by sector | |||||||||||||||||||||||||||||||
| Energy and Raw Materials | 4% | 13% | 16% | 10% | 11% | 11% | 5% | ||||||||||||||||||||||||
| Building, Construction | 3% | 8% | 3% | 5% | 7% | 3% | 5% | ||||||||||||||||||||||||
| Industrial Equipment | 21% | 17% | 13% | 20% | 13% | 19% | 23% | ||||||||||||||||||||||||
| Consumer Products | 3% | 2% | 6% | 2% | 5% | 3% | 4% | ||||||||||||||||||||||||
| Agro-Food | 10% | 3% | 8% | 5% | 8% | 9% | 6% | ||||||||||||||||||||||||
| Healthcare-Pharmaceuticals | 12% | 9% | 8% | 13% | 6% | 4% | 8% | ||||||||||||||||||||||||
| Wholesale, Retail | 6% | 6% | 7% | 4% | 7% | 9% | 5% | ||||||||||||||||||||||||
| Transport | 11% | 11% | 8% | 9% | 3% | 11% | 7% | ||||||||||||||||||||||||
| TMT | 20% | 16% | 18% | 20% | 14% | 21% | 23% | ||||||||||||||||||||||||
| Business and Consumer Services | 10% | 15% | 13% | 12% | 26% | 10% | 14% | ||||||||||||||||||||||||
Argos Mid Market Index - List of Underlying Transactions
H1 2004 - H2 2004 - H1 2005 - H2 2005 - H1 2006 - H2 2006 - H1 2007 - H2 2007 - H1 2008 - H2 2008 - H1 2009 - H2 2009 - H1 2010 - H2 2010 - H1 2011 - H2 2011 - H1 2012 - H2 2012 - H1 2013 - H2 2013 - H1 2014 - H2 2014 - H1 2015 - H2 2015 - H1 2016 - H2 2016 - H1 2017 - H2 2017 - H1 2018 - H2 2018 - Q1 2019
| Date | Acquirer | Target | Country | Industries | Valuation multiples | See details |
|---|
Argos Mid-Market Index Breakdown
Access restricted to "Epsilon Eurozone Data" subscribers.
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NB: This part includes the transaction multiples (median, LTM):
I- Breakdown per main industry sectors
- Energy, Raw Materials, and Chemicals
- Building - Construction
- Industrial Equipment
- Consumer Products
- Agro-food
- Healthcare - Pharma
- Wholesale - Retail
- Transport
- TMT (Technology, Media, Telecommunications)
- Business and Consumer Services
II- Breakdown per main Euro Zone countries
- Germany
- France
- Italy
- Spain - Portugal
- Benelux
Euro Zone Mid Market M&A Trends
Access restricted to "Epsilon Eurozone Data" subscribers.
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NB: This part includes the following data:
- Euro zone M&A mid market activity (volume & value)
- Share of foreign buyers within industrial buyers
- Breakdown of foreign buyers (Europe -non Euro zone, North America, Asia, RoW)
- Share of listed buyers within industrial buyers
Euro Zone Mid Market LBO Trends
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NB: This part includes the following data:
- Euro zone LBO mid market activity (volume & value)
- Euro zone LBO exit mid market activity (volume & value)
- Share of SBOs within LBO exits
Argos Mid Market Index - Methodology
The Argos Mid-Market Index measures the evolution of euro zone private mid market company valuations.
Carried out by Epsilon Research for Argos Soditic and published every quarter, it reflects median EV/EBITDA multiples, on a six-month rolling basis, of mid market M&A transactions in the euro zone.
The preparation of the Argos Mid-Market Index is based on a rigorous methodology and in-depth scrutiny of M&A transactions making up the sample :
- Choice of the relevant multiple: the EV/EBITDA multiple is the most suitable for a European index as it is not impacted by the target’s financial structure nor by its policies regarding depreciation and provisioning (which vary in time and between countries). It is also the closest readily available proxy for operating cash flow.
- Sample of M&A transactions analysed, using the following criteria :
- acquisition of a majority stake,
- target based in a euro zone country,
- mid market : equity value in the €15-500m range (€15-150m up to H1 2013; €15-500m from H2 2013 onwards),
- certain activities excluded (financial services, real estate, high-tech),
- availability of relevant target financial data.
- Information sources are those used by Epsilon Research to prepare analysis reports on transactions available in its EMAT database:
- Professional partner databases such as: CorpfinDeals (transactions), CompanyQuery (company accounts),
- Publicly available information: company accounts, press releases, annual reports (buyers / sellers), press articles, etc.
- Comprehensive analysis of each transaction identified: research covering all available information; verifying, cross-checking, restating financial data; analysis of target activity and of the context of the deal; calculating and analysing acquisition multiples; rating the reliability of multiples.
The Index in perspective:
Following its launch in December 2006, the Argos Mid-Market Index has become a leading reference for private transactions, used by private equity funds, M&A advisors, investment banks, and accountants.
The strict methodology followed guarantees that the index is rigorous, relevant, stable and transparent. The goal is to offer market professionals and company managers a reference tool for understanding the evolution of acquisition prices in private company transactions.
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The Index is only an indication of the evolution of private company prices. It is relevant in relative, not absolute, value. The Index was not designed as a business valuation tool and cannot be used directly to value a company. |
In partnership with
Index source of information:
EMAT - Epsilon Multiple Analysis Tool™
The Reference Source for Private Company Acquisition Multiples
