UK and Ireland lose top spot as European buy-and-builds reach fever pitch

Iberia and the DACH region also posted significant declines in the first half, according to Silverfleet’s latest European Buy & Build Monitor.

The UK and Ireland have lost their position as Europe’s busiest market for buy-and-builds in the first half of this year as activity climbed to record highs, according to research from Silverfleet Capital.

British and Irish companies made just 58 add-ons during the period, the first time deal volumes have fallen below 70 in more than two years, according to the private equity firm’s latest European Buy & Build Monitor.

Iberia and the DACH region also posted significant declines in activity in H1, while the Nordic region was Europe’s busiest in the first half with 72 add-ons.

Limited and general partners are deferring decisions on capital raising and investment activity until Brexit is resolved, panellists noted at an industry conference in London in September.

European-headquartered companies with private equity backing completed a provisional 368 add-ons in H1, up from 338 in the same period last year and the highest number on record.

The figure includes a pro-forma volume adjustment of 62 representing the change that would have been required in Silverfleet’s last report to obtain the accurate H2 2018 volume figure.

The report said France hosted the two largest add-ons of H1 2019: Colisée, an elderly care provider backed by IK Investment Partners, acquired healthcare business Armonea for a reported €550 million in February; and PAI Partners-backed manufacturing business Stella acquired the Ireland-based Shutters & Awnings business of CRH for an estimated €300 million.

Disclosed deal values fell to €2.1 billion for the period, down from €4.9 billion in the first half of last year. The report attributed this decline to a trend away from disclosing deal values, which it said was likely to have skewed the results.

According to a February report by Bain & Co, buy-and-builds offer a “clear path to value” at a time when deal multiples are at record levels. The strategy, Bain noted, can help justify a relatively expensive platform acquisition by offering the opportunity to complete smaller add-ons that can be acquired for lower multiples later on.

A PwC survey of 250 private equity principals in Q4 2018 found that buy-and-build activity was expected to be the fourth-most important influence on value creation in 2019, behind the likes of operational improvements and financial engineering.