Mid-market multiples make a comeback in Q3, 2024 according to the Argos Index®.
European mid-market M&A is gaining momentum, with valuations for unlisted SMEs rebounding to 9.5x EBITDA in Q3 2024.
This is evident from the latest Argos Index®, a benchmark for eurozone SME transaction multiples published by European investor Argos Wityu and Epsilon Research.
What’s driving the surge?
The recovery in multiples marks a return to higher acquisition prices, buoyed by improving economic conditions and a resurgence in leveraged buyouts (LBOs). Capital availability and easing inflation have prompted the ECB to initiate rate cuts, helping restore investor confidence.
“The upward trend reflects a more favorable funding environment and renewed M&A activity, though geopolitical uncertainties and slow eurozone growth remain hurdles”, comments Louis Godron, Chair of Argos Wityu.
Key highlights include:
• In the third quarter of 2024, multiples paid by investment funds were up significantly, rising 8.6 percent to 10.1x EBITDA.
• Those paid by strategic buyers rose slightly to 8.8x EBITDA, in line with the rally in listed equities.
• Fewer extreme deals: Transactions with extreme multiples (below 7x or above 15x EBITDA) dropped to 39 percent of deals, down from 48 percent in Q2 2024, suggesting more normalized pricing.
LBO market on fire
The LBO sector is a key driver of mid-market activity, with deal volumes climbing 30 percent and values skyrocketing 80 percent year-on-year in the first nine months of 2024. These deals now account for 17 percent of M&A transactions, up from 15 percent in 2023, reinforcing private equity’s dominance in mid-market growth.
While overall M&A activity grew 7 percent year-over-year in Q3, smaller transactions under 150 million euros led the way, reflecting stronger appetite for mid-sized targets.
Outlook
As the eurozone navigates inflation stabilization and geopolitical headwinds, mid-market M&A continues to offer opportunities for investors. With LBOs on the rise and capital increasingly flowing back into the market, M&A professionals should keep a close watch on competitive multiples and sector dynamics heading into 2025.
For private equity and strategic acquirers, the battle for quality assets is heating up, signaling a dynamic and competitive deal-making landscape in Europe’s mid-market.
Read also: The current M&A-market in 15 quotes
