Valuation differences spark cross-border deals

Amsterdam, March 10, 2022 - Compared to neighboring countries, companies in the United Kingdom and Ireland are sold for relatively high prices. On average, companies were sold for 5.45 times their gross profit.

These are the most important findings of the UK&I M&A monitor, the periodic survey of M&A platform Dealsuite into data and trends for the M&A market in the United Kingdom and Ireland. The research was conducted among 323 M&A advisory firms that focus on companies with a revenue between 1 and 200 million pounds.

Multiples in neighboring countries

For the first time, this report compares the differences between the multiples in the United Kingdom and Ireland with neighboring countries. On average, an SME company in the United Kingdom and Ireland was sold for a higher price compared to the Netherlands and France. Buyers from the United Kingdom and Ireland can benefit from considering foreign targets.

Sector differences

During the second half of 2021, strong increases in transactions within Business Services and Media and Communication were reported. The sectors Agri & Food and Wholesale Trade reported the lowest number of transactions. The share of companies sold in the Construction & Engineering sector dropped by 4 percent.

Average sector multiple has decreased

On average, in the second half of 2021, the price paid for an SME was 5.45 times its gross profit, which decreased compared to 5.50 in the first half of 2021. The average Ebitda multiple for companies in the Hospitality & Tourism sector increased the most with 0.85 from 3.65 in H1-2021 to 4.5 in H2-2021. A significant decrease of 0.95 was reported in the Automotive, Transportation & Logistics sector, the average EBITDA multiple for this sector is now set at 3.7.

The benefits of cross-border deals

According to Floyd Plettenberg, CEO at Dealsuite, this difference in multiples fosters cross-border deals. ‘By comparing the different multiples between countries, it becomes clear that for buyers from the United Kingdom and Ireland it may be beneficial to consider cross-border opportunities. The average Dutch and French multiples are lower compared to the average multiple in the United Kingdom and Ireland, this means that advantage can be taken from acquiring abroad for a lower price. In contrast, companies in the DACH region on average are sold for a higher price, it may therefore be beneficial to attract buyers from the DACH region.’

Outlook

The outlook for the UK&I M&A market in the first half of 2022 is very positive. The large majority of advisors (91%) are optimistic about the months to come. Only 9% of advisors expect the M&A market to deteriorate.