THE ARGOS MID-MARKET INDEX
Latest release (June 2011) - Mid market valuations return to their pre-crisis level
The valuations of medium sized unlisted euro zone enterprises rose to 7,2x EBITDA at the end of June 2011, bringing it back to its historical average since the creation of the Argos Mid-Market Index.
Paris, 28 September 2011
The increase in the Index is driven by the increase in acquisition multiples in LBO transactions which reached 7.6x EBITDA, i.e. +13.5% compared to December 2010. The LBO funds have thus paid 10% more for their acquisitions than have strategic buyers, for which acquisition multiples only rose marginally to 6,9x EBITDA.
Not only has the plentiful available liquidity which the funds still have encouraged for the acquisition of attractive enterprises, but as Gilles Mougenot, Chairman of Argos Soditic France underlined: «it also seems to have led them to bet, more strongly that did industrial buyers, on a return to growth of the enterprises », and so to reason often in multiples of expected future results.
On the other hand, Mid market M&A activity in the euro zone has, surprisingly, only shown slight evolution since the previous half year and for 18 months, has remained at its 2003/2004 level. The factors which seemed to encourage a revival of activity, in particular the low level of debt of industrial enterprises, only had a limited influence in the face of macroeconomic uncertainties and market volatility which led companies to delay their acquisition projects.
ABOUT THE INDEX___________________________________________________________________________________________________
The Argos Mid-Market index measures the evolution of European private mid-market company prices.
Carried out by Epsilon Research for Argos Soditic and published every six months, it reflects median EV/EBITDA multiples, on a twelve-month rolling basis, of mid-market M&A transactions (Equity Value in the €15-150m range) in the euro zone. The index now covers a period of 7 years (since 1 January 2004).
Since its launching in December 2006, the Argos Mid-Market index has become a leading reference for players in private markets, such as private equity funds, M&A advisors, investment banks, and accountants. But it only tracks price movements for unlisted businesses, indicating relative values. It is not designed as a business valuation tool.
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.
The Argos Mid-Market half-yearly index meets a growing demand from the market for rigorous, objective and transparent information. This demand is due to an increase in mid-market M&A deals, where market prices lack visibility, as well as to the growing role of private equity in the European economy and the evolution of professional standards (EVCA/AFIC) and accounting norms (IFRS).
Information sources are those used by Epsilon Research to prepare analysis reports on transactions available in its EMAT database:
- professional partner databases: 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.