European M&A falls despite mid-market valuations holding firm

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Unlisted mid-market valuations in the eurozone remain stable at 6.3 times EBITDA whereas M&A activity is at an historically low level for the year 2012 in spite of a rise in the last quarter, according to the Mid-Market Index from European private equity firm Argos Soditic Partners.

The Index saw an increase of five per cent compared to the final quarter of 2012.

The slight recovery can be attributed principally to the increase in prices paid by industrial buyers and the strong rise in the stock market since January 2012.

Although they have fallen from the 7.1 times peak since then, the prices paid by LBO funds remain almost identical to those paid by industrials with the funds concentrating on the most attractive companies.

In spite of a rise in the previous quarter, M&A activity has fallen sharply this quarter – 13 per cent in volume and 36 per cent in value, and returning to its level in the second and third quarter of 2013 in an economic context which is durably depressed in the eurozone.

LBO activity also fell, by 12 per cent in volume for the first quarter. Only foreign buyers maintained their level of activity, as they continued to capitalise on the withdrawal of eurozone industrial buyers. Their share in mid-market transactions stood at 37 per cent this quarter.

“The continuing weak activity in the M&A market can be attributed notably to the persistence of the macroeconomic uncertainties in the eurozone and to the increasing likelihood of a recession,” said Gilles Mougenot, president of Argos Soditic Partners.

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