European M&A Monitor September 2024

Introduction

Thank you for taking the time to read this fourth edition of the European M&A Monitor. This report consolidates research conducted by Dealsuite, the leading European platform for M&A transactions. It provides statistics and trends for the Western- and Eastern-European M&A mid-market (enterprises with a revenue between €1 million and €200 million) over the first half of 2024.

Dealsuite surveyed 2,049 M&A advisory firms operating in the M&A mid-market of the UK&I, DACH, France, CEE and the Netherlands. Data from the CEE region has been included in this report for the first time, providing a more comprehensive overview of the European market.

The aim of this study is to create periodic insights that enhance the transparency of the European market and serve as a benchmark for M&A professionals. While we have been publishing local/regional reports for several years, this is the fourth time we publish this pan-European report, with a focus on inter- regional differences as well as similarities. We are convinced that sharing information within our network helps create more insights in the various regional M&A markets and leads to an improved quality and volume of deals.

Floyd Plettenberg MSc. EMFC
CEO Dealsuite

I Transactions

Increase in Buy and Sell-Side Transactions

Figure 1 shows the development of buy and sell-side transactions over H1-2024 compared to H2-2023.

After a turbulent 2023, both the ECB and the Bank of England announced an interest rate cut mid 2024*. These rate cuts provide a positive boost to the market. Economic forecasts for 2024 were already positive, and market confidence appears to be returning. The number of both buy- and sell-side transactions increased. The biggest increase in buy-side transactions was reported in the DACH region (+13%). In the UK&I, the number of sell-side transactions significantly increased by 9%, the number of buy-side transactions only slightly increased by 1%.

On average, the buy-side transactions over the four regions increased by 8%. The number of sell-side transactions over the four regions increased by 4% on average.

Biggest Drop in Transaction Share in Software Development Sector

The distribution of transactions completed in H1-2024 across sectors is illustrated in Figure 2. There is a correlation to be expected between the relative size of a specific sector in the mid-market and the percentage of closed transactions. Most transactions were closed in the Business Services sector (16%). A drop of 2 percentage points was reported in the Software Development sector to 5%.

In all of the four regions, 7% of all transactions were reported in the Healthcare & Pharmaceuticals sector. In the Netherlands and the UK&I regions, the majority of transactions took place in the Business Services sector. Conversely, in France and the DACH region, the Industry & Manufacturing sector saw the highest number of transactions closed.

II Sector Multiples per Country

The Average EBITDA Multiple Increased to 5.2

Sell-side advisors defined the average EBITDA multiple by industry. In this edition, we asked to revise the industry multiples from H2-2023. The results are shown in Figures 3 and 4.

From H1-2022 to H1-2023, the average European EBITDA multiple significantly decreased from 5.4 to 5.1. In H2-2023, the multiple remained stable at 5.1. In H1-2024, the average EBITDA multiples across all regions increased, leading to a rise in the average European EBITDA multiple from 5.1 to 5.2.

When comparing the average EBITDA multiples of the various European countries, it is clear that involving a foreign party in the purchase or sale of a business could lead to a higher selling price.

In the CEE region, the Healthcare & Pharmaceuticals sector had the highest EBITDA multiple in H1-2024. In contrast, across the other four regions, the Software Development sector recorded the highest EBITDA multiple. In the DACH region, companies in this sector were valued at 8.6 times EBITDA, compared to 7.2 times EBITDA in the Netherlands.

III Average Age of Businesses Offered

Companies Are Offered for Sale Earlier Than 10 Years Ago

Over the past decade, the business landscape has undergone significant changes. Technological advancements have surged, more companies are being founded, and businesses must work harder to stay ahead of the competition (McKinsey, 2024). Mergers and acquisitions are becoming increasingly popular among companies of various sizes. Advisory firms were asked about the average age of companies being offered for sale. The results can be found in Figures 5 and 6.

According to the majority of advisors (55%), on average a company is offered for sale for the first time between the 10th and 20th year of existence. Additionally, 40% of advisors report that companies are now coming to market earlier than 10 years ago. Only 9% report that business owners are retaining ownership for longer.

IV Buyers Intent

Increase in Average Number of Interested Parties Per Firm (8.3)

The M&A market is currently a “seller’s market,” characterised by higher demand than supply. The ratio between demand and supply varies by sector. M&A advisory firms were asked to indicate the demand-to- supply ratio for each sector—in other words, on average, how many seriously interested parties contact the seller for each business. The results are presented in Figure 7.

Several factors can influence the number of interested parties for a business. For instance, financing a business and its operations becomes more expensive with high interest rates, while high inflation and market uncertainty can affect buyers’ willingness to purchase. From 2022 to 2023, the average number of interested parties decreased across most sectors. In H1-2024 demand increased again. To ensure a reliable comparison with the results from H1-2023, CEE data has been excluded from Figure 7. For insights on the average number of interested parties per firm in the CEE region, please refer to the CEE Monitor.

V Outlook

Positive Expectations for H2-2024

Assessing the performance of the European M&A mid-market is based on many factors, including the willingness of entrepreneurs to sell their businesses, funding availability, macroeconomic developments etc. An interpretation of these factors is needed to determine how the market will develop. The survey included both assessments of the M&A mid-market in H1-2024 (retrospective) and H2-2024 (projection).

The majority of advisors look back at H1-2024 with a satisfied feeling (71%). 29% of the advisors are unsatisfied with the performance of H1-2024. The expectations for the first half of 2024 are positive, on average, 73% of the advisors have optimistic expectations for the second half of 2024.

The advisors from the UK&I are most optimistic about H2-2024 (89%). Advisors from France are least optimistic about the second half of 2024, 36% of advisors express optimistic expectations. The majority of advisors from the CEE region, DACH region and the Netherlands are optimistic about H2-2024.

VI Dealsuite Platform Data

One Third of Deals Offered on Dealsuite Have a Revenue of Over €7.5 million

Through Dealsuite, M&A advisory firms present sell-side opportunities to potential buyers. Figure 10 shows the annual revenue of companies offered for sale on Dealsuite in H1-2024. Depending on the transaction timeline, some of these deals will either be completed or fall through in H2-2024 or H1-2025. We can consider this data a tentative forecast of the size of companies likely to be sold on Dealsuite in the coming quarters.

This platform data reveals that 28.9% of the deals listed on Dealsuite had an annual revenue of less than €2.5 million. 22.7% of deals had a revenue between €2.5 million and €5 million. 26.4% of the deals had a revenue exceeding €10 million.

VII Method

The majority of M&A transactions take place in the mid-market. This M&A Monitor uses the definition of a mid-market company as having a revenue between 1 and 200 million euros. The survey that was the basis for this M&A Monitor was sent to 2,049 M&A advisory firms. Considering their combined input, they represent an essential part of the M&A mid-market in Western- and Eastern-Europe. Out of the total of 2,049 advisory firms, we received in total 599 responses (29% response rate).

Sources used:

• 599 survey responses from key Western- and Eastern-European M&A advisory firms
• Bank of England. (2024, August). Monetary policy summary and minutes - August 2024.
• Dealsuite M&A Monitors 2015 - 2024
• Dealsuite transaction data 2015-2024
• European Central Bank. (2024, June 6). Monetary policy decisions - June 2024.
• Field, A. (2011) Discovering Statistics SPSS. Third edition, SAGE publications, London. 1 -822
• McKinsey. McKinsey Technology Trends Outlook 2024

This research was conducted by Jelle Stuij and Roos Bijvoet. For further questions, please contact Maarten Reinders, CCO Dealsuite.