Valuations of unlisted mid-market businesses in the Euro zone fell again in the second half of 2009, continuing a 30-month decline.
The Argos Mid-Market Index, released this week, showed that valuations sat at 6.0x EBITDA at the end of December 2009, their lowest point since the French private equity firm first commissioned the six-monthly index in 2004.
Deteriorating performance and a weakening growth outlook is having an effect on valuations for acquisitions by private equity buyers, the report noted, while the limited activity of listed companies and foreign buyers – especially US companies – is pulling down the average price paid by strategic buyers.
Private equity buyers on average paid 5.7x EBITDA for assets in the second half of the year, down from an average 6.1x paid during the previous six months. Strategic buyers, meanwhile, paid 6.2x EBITDA compared to 6.6x in the first half.
The six-monthly index measures the median EBITDA multiples for the acquisition of majority stakes in companies with an equity value of between €15 million and €150 million. Companies being acquired through restructuring process are excluded.
Earlier this week, research from the Centre of Management Buyout Research revealed that 2009 had been Europe’s slowest year in terms of buyout activity since 1995. “Most of the year was pretty dire, with some green shoots appearing towards the back end of the year,” said Christiian Marriott, a director at mid-market firm Barclays Private Equity, which sponsors the CMBOR study.