Study: Mid-market valuations jump in H2 2013

Figures suggest trade buyers drove prices up in the second half – but overall activity was well down on 2012.

The valuations of mid-market companies in Europe climbed 12 percent to around 7.5 times earnings before interest, tax depreciation and amortisation during the second half of last year, according to a new report by private equity group Argos-Soditic and Epsilon Research.

The Argos Mid-Market Index, which measures valuations at European private companies in the €15 million to €150 million range, said the biggest driver of this uptick was trade buyers paying higher multiples – about 7.6 times EBITDA on average, a 25 percent increase on the first half of the year.

According to Gilles Mougenot of Argos Soditic, buyers were reassured by the recovery of stock markets and the lack of bad news from the Eurozone. “This quarter marks the gradual return of confidence to investors who were burned by the financial crisis thanks to the easing of macro-economic risks in the Eurozone,” he said in a statement.

For the first time since 2008, Americans made up the majority of overseas trade buyers, accounting for 51 percent of European mid-market transactions. They have historically averaged 32 percent.

The report also found that LBO activity increased substantially in the second half – up 85 percent in volume terms and 94 percent in value terms compared with the first half of the year. It suggested this was largely due to capital becoming more readily available during the period. 

However, Grégoire Buisson, a manager at Epsilon, suggested these figures should be taken with caution, since they came on the back of a notably slow first half of the year. Overall, he said: “It’s still a bad year, when you compare it to 2009 to 2012.”

Overall M&A activity in the mid-market recovered gradually in the second half – up 18 percent in terms of volume, and 60 percent in terms of value – although this too was weaker than the equivalent period in 2012.