However, the rise in the Argos Mid-Market Index remains moderate, and valuations remain below their pre-2008 levels. The increase is driven essentially by the LBO funds (6.7x compared to 5.8x in June 2010) which paid higher prices for their acquisitions than did the industrial buyers (6.6x compared to 6.5x in June 2010).
The increase in the Argos Mid-Market Index occurs within the context of a decline in mid market M&A activity in the euro zone, down 10% compared to its level in the first half of 2010. Only LBO funds have been more active than previously.
Indeed, still with significant amounts of money to be invested, buyout funds also benefitted from the wait-and-see attitude of euro zone strategic buyers, who did not use their improved cash reserves and better access to bank financing to make more acquisitions.
"Contrary to larger transactions, mid market M&A activity was decreasing and the number of attractive opportunities remained weak", comments Gilles Mougenot, President of Argos Soditic France. This created a “scarcity effect” around certain transactions and pushed valuations up, in spite of the fact that bank leverage has become stricter.
Contacts Argos Soditic: Gilles MOUGENOT, Karel KROUPA
About Argos Soditic
Argos Soditic is an independent European private equity group with offices in Paris, Milan and Geneva.
Since its creation in 1989, Argos Soditic has carried out more than 50 transactions focusing on management buy-outs and buy-ins in small and medium companies. Argos Soditic typically takes majority stakes ranging from €10m to €50m in companies with revenues of €20m to €400m.
The firm has developed a track record of unusual, complex and off-market transactions where the firm’s combination of local presence and international experience is able to add value to the small and medium-sized businesses it invests in.
At the end of 2010, Argos Soditic raised its new fund Euroknights VI at its hard cap of €400m. The firm has assets under management of €750m allocated to its lower mid market buy-out funds and Argos Expansion, the firm’s minority equity and expansion capital fund which held a first close in 2010.
About Epsilon Research
Epsilon Research is the first financial analysis bureau to specialise in European private company M&A/private equity transactions. Its key product, EMAT (« Epsilon Multiple Analysis Tool™ »), is a unique database of European deal analysis reports that includes the detailed calculation of acquisition multiples, accessible via its proprietary IT platform. For its customers (investment funds, banks, corporations, advisors, accountants) it has quickly become a source of reference in Europe for private company acquisition multiples. Epsilon has also developed a number of market intelligence tools: financial databases (M&A transactions, company accounts); sector indices; market studies and analysis; tailored service for private equity quarterly portfolio valuations.
Epsilon's team is composed of Paris and London based corporate finance professionals and financial analysts. For its EMAT database, Epsilon has received the label of Finance Innovation, the Paris-based global financial services cluster.
About the Argos Mid-Market Index
The Argos Mid-Market Index measures the evolution of European private mid market valuations. Based on the median of historical EV/EBITDA multiples, on a twelve-month rolling basis, it is carried out by Argos Soditic and Epsilon Research, and published every six months. The transaction sample fulfils the following criteria:
- mid market companies (equity value between €15M and €150M)
- target based in a Euro Zone country
- acquisition of a majority stake
- specific industries excluded (financial services, real estate, high-tech)
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