The acquisition prices of SMEs continue to soar in the euro zone. They have been holding 10 times Ebitda for 9 months now, according to the latest Argos index. In volume, M&A slowed by 20%, but the fall is even larger in the UK.
The end of several sales, such as that of the telecom tower operator TDF, does not mark a slowdown in the hunt for medium-sized companies in the euro zone. According to the latest Argos index, funds and manufacturers remain ready to pay 10 times the EBITDA (operating profit) of their target, a historic level in fifteen years, and unchanged for nine months.
The only slight sign of stalling comes from industrial buyers. The latter – which peaked at 11 times Ebitda in the first quarter – brought their bids down to around 10.3 times. However, this multiple remains ” high and lastingly superior To that paid by the funds, argos Argos. In fact, investment companies remain around 9.5 times.
Caution on the part of industrialists
M & A activity is, however, slowing down seriously in the euro zone. The volumes of acquisitions of SMEs fell by 20% to 13.5 billion euros in the first half of the year compared to the second half of 2018. Argos president Louis Godron refuses to see this as the consequence of the too large gap between sellers’ expectations and the price buyers are willing to put on the table: “Strategic buyers are certainly more cautious about prices. But the appetite of both manufacturers and funds remains historically very high ”.
In his eyes, it is above all the uncertainties linked to Brexit and trade tensions that encourage caution, he said, citing the example of a company that achieves 30% of its profit in the United States, but matters most. of its products from China, which makes it difficult to value.
The outbreak is expected to continue
The slowdown in the euro zone is however less pronounced than in the United Kingdom. The market is undergoing a big drag there because of the political turmoil, and despite the fall of the pound. Sales volumes fell 48% from one half-year to another to 6.6 billion euros (5.9 billion pounds), against volumes usually turning between 11 and 14 billion euros.
The market slowdown should not, however, push prices down. “The capital to invest funds is breaking records and banks are always very aggressive in their financing offers. Maintaining very low rates reinforces this prospect ”, says Louis Godron.