The European M&A market is showing clear signs of recovery, according to the latest Dealsuite European M&A Monitor for September 2024. After a turbulent 2023, marked by high interest rates and economic uncertainty, the landscape has shifted, driven by a more optimistic economic outlook and key policy changes. Both buy-side and sell-side transactions have increased in the first half of 2024 (H1-2024), supported by interest rate cuts from the European Central Bank and the Bank of England.
The report, which provides a comprehensive analysis of transaction trends, sector performance, and buyer behavior, highlights some of the most important shifts in the European M&A landscape. Here are the key takeaways:
1/ A strong rebound in transaction activity
After a challenging 2023, the European M&A market has bounced back, with significant growth in both buy-side and sell-side transactions. The number of buy-side transactions increased by 8% on average across four major regions (UK&I, DACH, France, and the Netherlands), while sell-side transactions rose by 4%.
- The DACH region saw the most notable surge in buy-side transactions, with a 13% increase compared to the second half of 2023 (H2-2023).
- The UK & Ireland reported the largest growth on the sell-side, with a 9% increase, driven by heightened confidence in the market following the BoE’s interest rate cut in mid-2024.
Despite variations across regions, the overall rise in transaction volumes reflects renewed confidence in the European economy, with the easing of interest rates playing a key role in unlocking deals that were previously stalled.
2/ Sector-specific trends: Business Services lead the way
The report reveals that Business Services was the most active sector, accounting for 16% of all transactions in H1-2024. This sector continues to be a key driver of mid-market M&A across Europe, particularly in the UK and the Netherlands.
However, other sectors also experienced notable shifts:
- Software Development saw a decline in transaction share, dropping by 2 percentage points to 5%. This contrasts with the high EBITDA multiples the sector commands, indicating that while it remains a lucrative field, transaction volumes have slowed.
- The Healthcare & Pharmaceuticals sector remained stable, accounting for 7% of all deals, particularly in Central and Eastern Europe (CEE) where the sector attracted the highest EBITDA multiples.
3/ EBITDA multiples show growth
One of the more positive findings of the report is the increase in average EBITDA multiples across Europe. After stabilizing at 5.1 in H2-2023, the average EBITDA multiple rose to 5.2 in H1-2024, signaling an improvement in business valuations across sectors.
- The Software Development sector led the way with the highest multiples, especially in the DACH region, where companies were valued at 8.6 times EBITDA.
- The Healthcare & Pharmaceuticals sector also performed well in terms of valuation, particularly in CEE and DACH regions, with multiples exceeding 7.5.
These increases highlight growing investor confidence and a willingness to pay premium prices for companies in high-growth sectors, particularly those with strong digital or healthcare components.
4/ Average age of businesses offered
Companies are offered for sale earlier than 10 years ago. 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.
5/ Buyers’ intent: a seller’s market
The M&A market remains firmly in the hands of sellers, with a significant number of potential buyers competing for limited opportunities. According to the report, the average number of interested buyers per company rose to 8.3 in H1-2024, up from 7.8 in H1-2023.
- Software Development remains the most sought-after sector, with an average of 12.7 interested parties per firm, followed by IT Services (11.8) and Healthcare & Pharmaceuticals (10.3).
- The sectors with the least buyer interest included Retail Trade and Hospitality & Tourism, both of which have struggled to regain pre-pandemic levels of demand.
Despite macroeconomic challenges such as inflation and higher costs of financing, the appetite for acquisitions, particularly in digital and healthcare sectors, remains strong.
6/ Positive outlook for H2-2024
Looking ahead, the outlook for the remainder of 2024 is overwhelmingly positive. The majority of M&A advisors surveyed (73%) expressed optimism for H2-2024, anticipating continued growth in transaction activity. This is particularly true in the UK&I, where 89% of advisors expect a strong performance in the second half of the year.
The broader European market also appears to be heading in the right direction, with most regions, including the DACH and CEE regions, forecasting solid deal flows and improving market conditions.
Conclusion: a stronger European M&A market
The Dealsuite European M&A Monitor paints a picture of a recovering and increasingly dynamic European M&A market in 2024. With rising transaction volumes, improving valuations, and a positive outlook for the remainder of the year, businesses and investors are showing renewed confidence in the opportunities that lie ahead.
For more detailed insights and data on the European M&A landscape, visit: www.dealsuite.com
