Argos Mid-Market Index Q4 2018: company valuations reach record level
Frankfurt am Main, Germany — Argos Wityu, an independent, pan-European investment firm, and Epsilon Research, an online platform for unlisted M&A transactions, unveiled the Argos Index® Mid-Market for the fourth quarter of 2018. Developed in 2006, the index has measured the development of company valuations of unlisted mid-market companies in the eurozone in which private equity funds had acquired a majority stake in the six months preceding the survey since it was first published. With the current edition, the Argos Index reports specific data for the German M&A market for the first time.
Strategic buyers drive valuations, index reaches all-time high of 10.1x EBITDA.
The development of the multiples can be explained on the one hand by strategic buyers, who paid an average EBITDA multiple of 10.7x in the fourth quarter as part of acquisitions, but also by financial investors, who valued companies at 9.8x EBITDA.
Essentially, the price increase is due to increased activity in European mid-market M&A transactions — in the second half of 2018, transaction volumes increased by 18 percent and cumulative transaction values by 17 percent. The difference is particularly large compared to the multiples of mid-cap listed companies(1), whose valuation has fallen by 11 percent to 8.0x EBITDA(2).
Valuations for unlisted companies showed momentum in the second half of the year that was independent of developments on the stock markets(3). This can be explained by several factors, including high cash holdings by large companies and high levels of “dry powder” from private equity investors who are raising increasingly large amounts of capital, as well as strategic buyers looking to acquire companies in search of growth, and the ever-increasing demand from institutional investors looking to improve their returns by investing in unlisted companies(4).
Germany: high M&A volume drives purchase prices
For the first time, the Argos Index also analyzes the German M&A market. In 2018, EBITDA multiples in Germany increased by 8 percent to 9.8x EBITDA, or by 3.8 multiple points since the low point at the end of 2009. This price development is driven by a dynamic M&A market, whose volume increased by 18 percent in 2018.
Since 2013, the development of German multiples has been in line with those of the euro area. The crises of 2009 (financial crisis) and 2012 (euro crisis) had no impact on valuation multiples in Germany compared with the development of valuation levels in the euro zone.
About Argos Wityu
Founded in 1989 as Argos Soditic, Argos Wityu is an independent pan-European investment company with offices in Brussels, Frankfurt, Geneva, Luxembourg, Milan and Paris. Argos Wityu focuses on management buy-outs, buy-ins and spin-offs for small and medium-sized companies with an enterprise value between €25 and €200 million. The funds advised by Argos Wityu invest in majority stakes with equity tickets between 10 and 100 million euros. Since its inception, Argos Wityu has launched seven funds and completed more than 75 transactions. The focus is on growth and transformation rather than high debt. The group has built a very strong track record in unconventional off-market transactions, where Argos Wityu’s combination of internationality and local presence has contributed to the development of small and medium-sized enterprises. The current Fund VII (520 million euros), which was launched at the end of 2017, has already completed ten transactions and is already more than 50 percent invested. In total, Argos Wityu manages funds with a volume of approximately 1 billion euros. In Germany, the company has stakes in aktivoptik, the fifth-largest chain of opticians and acousticians, and in Wibit Sports, the world market leader for floating water parks. The investment in Wibit brings to five the number of global market leaders in their respective industries in Argos Wityu’s 21-company investment portfolio: Gantrex, Henri Selmer, Sasa Demarle, Wibit and Zodiac Milpro. http://argos.wityu.fund
About Epsilon Research
Epsilon Research has developed the first online platform for unlisted M&A transactions aimed at professionals such as M&A advisors, private equity investors or experts. The Epsilon platform provides access to data, analytics, software tools as well as other services required for the valuation of unlisted companies: (1) EMAT, the largest database of transaction multiples of unlisted companies in Europe, with details on 8,000+ transactions between €1m and €500m enterprise value across all industries, (2) studies and indices regularly published by Epsilon, such as the Argos Index, (3) cloud-based software for M&A contacts and project management (“M&A CRM Suite”) as well as for valuation projects (comparative multiples and portfolios of PE funds).
About the Argos Mid-Market Index
The Argos Mid-Market Index measures the development of company valuations of unlisted mid-market companies in the eurozone. The analysis is conducted by Epsilon Research for Argos Wityu and published quarterly. EV/EBITDA multiples represent median values of mid-market M&A transactions on a six-month rolling basis. The underlying sample is based on the following criteria: Acquisition of majority stakes, target company is headquartered in the eurozone, mid-market (equity value between €15 million and €500 million), exclusion of certain sectors (financial services, real estate and high-tech), availability of relevant transaction data.