First quarter add-on activity has been lacklustre compared to last year’s figures, according to a study released on Monday.
The first quarter of 2013 was the third-weakest quarter by deal volume over the past 5 years, with only 56 add-ons completed, according to a report by Silverfleet Capital. That’s a 28 percent drop from the 78 bolt-on deals recorded in the same period last year, and was also 22 percent lower than the 2012 average of 72 add-ons per quarter.
The results showed significant regional variations, however. France was among the worst performers, with only two deals recorded during the period. “You would normally expect France to complete between eight and 10 bolt-on transactions during the first quarter,” Neil MacDougall, managing partner at UK-based mid-market firm Silverfleet, told Private Equity International. “But the country seems a bit depressed at the moment. Monsieur Hollande and his government are at a record low in terms of public approval, and for whatever reasons it is just not happening there.”
To get back to the number we were seeing in 2011 will require quite a big reverse in the trend. We are not seeing signs of that just yet
German-speaking countries, as well as Italy, Spain and Portugal, also recorded disappointing results. “This data suggests that Europeans do not yet see an end to the continent’s sovereign debt and banking problems and the knock-on impact they are having on GDP growth,” commented MacDougall.
Other areas, such as Ireland and the UK, the Nordics, Central and Eastern Europe and Benelux held up relatively well, with activity broadly in line with last year’s average. Denmark, for example, recorded the largest bolt-on deal of the quarter, with the DKK2 billion (€268 million, $348 million) acquisition of ISS’s pest control division by EQT-owned Anticimex. Deals sealed by private equity-backed companies outside Europe also showed resilience, with five bolt-on acquisitions both in North America and Asia Pacific.
Average disclosed deal size for bolt-ons held better than volume for the overall region, at £51 million (€60 million, $78 million) compared to £52 million in Q4 2012 and £46 million on average for the year. But Silverfleet cautioned that the figure recorded in the first quarter this year was derived from a small sample, made up of 11 deals with disclosed value over the period.
MacDougall was not optimistic a significant rebound would materialise before the end of the year. “Generally these things turn around slowly. To get back to the number we were seeing in 2011 will require quite a big reverse in the trend. We are not seeing signs of that just yet.”
Europe recorded a total of 395 add-on acquisitions in 2011 – with 105 deals completed over the first quarter alone – compared to a total of 285 for the whole of 2012.