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The Western-European M&A market shows signs of recovery, with an increase in transactions and steady EBITDA multiples. Expectations for early 2024 are positive. Over half of the transactions were financed by debt, with vendor loans becoming a more popular source of financing.
These are the most important findings of the European M&A monitor, the periodic survey from Dealsuite that looks into the SME M&A market trends in Western Europe. The research was drawn from 1,330 M&A advisory firms that focus on companies with a revenue of €1-200mn.
Surge in deals
Despite challenging economic conditions, there was a noticeable uptick in the volume of both buy-side and sell-side transactions in three out of four regions during the second half of 2023. The United Kingdom and Ireland reported the largest growth in transaction numbers, with buy-side activities increasing by 15%. Another significant growth in buy-side transactions was reported in the Netherlands (+12%). Meanwhile, the DACH region experienced the most significant rise in sell-side transactions, recording an 11% increase. France was the exception, where a decrease in sell-side transactions by 9% and in buy-side transactions by 2% was observed.
Stable EBITDA multiples
The average EBITDA multiple in the European M&A market held steady at 5.1 in H2-2023, following a decrease from 5.4 in H1-2022. Stability marked the UK&I, DACH, and France, while the Netherlands saw a slight rise to 4.75. The differences in EBITDA multiples between countries can potentially increase sales prices.
Vendor loans on the rise
In H2-2023, 56% of transactions were facilitated through debt financing, with bank loans serving as the predominant funding source. Vendor loans significantly contributed to the financing landscape, particularly in the Netherlands (83%) and the UK&I (69%). Contrastingly, in France, vendor loans featured in only 10% of transactions.
Floyd Plettenberg, CEO of Dealsuite, outlines the strategic benefits of this approach. He states, "Vendor loans demonstrate the banking sector's confidence in the new owner, thereby motivating banks to increase their financing, which aids in facilitating the completion of the deal. Additionally, in the current financial environment, a subordinated loan with an interest rate of around 8% yields a return three times greater than that of traditional savings accounts. Thus, this method offers advantages across various aspects, creating an ideal win-win scenario."
Optimism for H1-2024
The sentiment among advisors regarding the European M&A market is generally positive, with 61% feeling satisfied with the performance in H2-2023, despite 39% being less satisfied. Looking forward, a significant majority of advisors, 68%, express positive expectations for the market's performance in the first half of 2024.
