Argos Index® Q4 2024 report shows valuation growth despite economic uncertainty.
The European mergers and acquisitions (M&A) market for small and mid-sized enterprises (SMEs) continued its upward trajectory in the fourth quarter of 2024, with acquisition prices reaching 9.8 times EBITDA, according to the latest Mid-Market Argos Index®.
Published by independent European investment fund Argos Wityu and Epsilon Research, the index monitors the valuations of unlisted eurozone SMEs acquired in majority-stake transactions over the past six months.
Key market drivers
The latest data reflects a strengthening M&A landscape, propelled by improved financing conditions and an uptick in leveraged buyout (LBO) activity. Lower inflation, declining interest rates, and anticipated cuts from the European Central Bank (ECB) have reduced capital costs and increased access to funding, fostering a more active deal-making environment.
"In the fourth quarter of 2024, acquisition prices for unlisted eurozone SMEs rose again to 9.8x EBITDA”, says Louis Godron, Chair of Argos Wityu.”The index was boosted by a further recovery in M&A activity (except in France) and by good momentum in LBO transactions in the mid-market (between 15 million euros and 500 million euros), supported by a high level of exits by funds. However, the recovery in the index remains slow due to weak growth forecasts, political turmoil, and geopolitical threats."
Investment funds and strategic buyers drive valuations
Both investment funds and strategic buyers played a significant role in driving acquisition multiples higher in Q4 2024:
• Investment funds paid an average multiple of 10.3x EBITDA, a 2 percent increase from the previous quarter.
• Strategic buyers also increased their multiples to 9.3x EBITDA, despite turbulence in public equity markets.
• The valuation gap between investment funds and strategic buyers remained substantial at 1.0x EBITDA, with fund-backed companies showing a slightly higher EBITDA margin (20 percent vs. 18 percent).
Decline in extreme valuations
The proportion of transactions at extreme multiples (either below 7x or above 15x EBITDA) continued to decline, accounting for 33 percent of deals. This marks a return to more stable valuation trends:
• Transactions below 7x EBITDA accounted for 20 percent, aligning with levels seen in 2021-2022.
• Deals above 15x EBITDA dropped to 13 percent of total transactions, while those exceeding 20x EBITDA fell to just 3 percent.
Mid-Market M&A and LBO markets see strong secovery
A key contributor to the valuation upswing was the resurgence of mid-market M&A activity across the eurozone:
• Deal volumes increased by 13 percent in 2024 compared to 2023, while transaction values surged by 14 percent.
• The LBO market experienced even more pronounced growth, with a 22 percent rise in transaction volume and an impressive 65 percent jump in value. This was largely driven by a sharp increase in fund exits, which rose 40 percent year-over-year.
Outlook for 2025
The continued improvement in financing conditions and stabilizing macroeconomic environment suggest further gains in SME valuations. However, economic growth concerns, geopolitical risks, and political instability in certain regions could temper the pace of recovery. As investors and strategic buyers navigate these dynamics, the eurozone M&A market remains on a cautious but upward trajectory.
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