Europe builds a case for add-ons

Acquisitions by private equity-backed companies with European headquarters rose 20% during the first half, according to Silverfleet Capital.

European buy-and-build activity is expected to have hit record levels during the first half of this year, according to a report by European mid-market firm Silverfleet Capital.

The firm’s Buy & Build Monitor reported 320 add-ons by private equity-backed companies with European headquarters during the first half of 2017, up from 266 in first half of last year. This year’s figures included 46 provisional add-ons to account for smaller deals, which are less well reported and tend to come to light months after the research is conducted.

The average disclosed value of add-ons for the half was £92 million ($122.8 million; €104.2 million), down from £109.5 million in 2016. Such a decline could be attributed in part to managers looking outside their traditional sweet spot in a bid to avoid bloated valuations and deploy capital.

“As valuations continue to remain high and debt is still relatively cheap, add-ons have become a widely used means of averaging down high entry prices and creating value,” Neil MacDougall, managing partner of Silverfleet Capital, said.

Demand for Norwegian companies soared in the first half, with add-ons in the region climbing 47 percent to 66. The UK and Ireland defied fears of a dramatic post-EU referendum slump in activity with 53 add-ons over the period, 5 percent fewer than the previous half-year.

French add-ons dropped by 23 percent to 27 during the first half amid uncertainty over the presidential election in April and May.