European overview

Milan Duomo 1

This report identifies key themes driving European private equity (PE) deals’ EV/EBITDA multiples on a quarterly basis. The objective is to assist PE investors in understanding drivers behind value trends across regions and sectors, leading to good investment opportunities.

Q1 2020 suffered a slight reduction in deal volume when compared to the same quarter in 2019 as the effects of COVID-19 were not yet realised by market figures. However, with the global situation worsening throughout Q2 2020 the deals market was substantially impacted as deals in their infancy were put on hold to wait out the unfolding situation across the globe.

In Q2 2020, flight to quality and scarcity of opportunities has driven average multiples paid in PE-backed transactions throughout Europe to increase slightly when compared with the previous quarter and the same quarter in 2019. However, deal volumes were down by a third compared to the previous quarter and the lowest since Q1 2016.

LTM mutliples distribution by region Q2 2020 4

For the fourth quarter in a row, the Nordic region saw the highest average multiples despite a 1% reduction versus the previous quarter and a 2% decrease against the same quarter in 2019. Despite the reductions, the average valuation for the quarter was still well in excess of 10x and reduction in deal volumes was far lower than the average drop across all European regions.

The second hottest region in Europe for the quarter was France despite experiencing the second largest drop in deal volumes at over 50%. With a 4% increase versus Q1 2020 and a 5% increase on Q2 2019 the region also revealed the second largest increases in valuations.

Deal volumes by region Q2 2020 4


The third richest region in terms of valuation was the UK and Ireland with valuations remaining broadly flat and well in excess of 10x. However, the region experienced a 62% drop in deal volumes, the largest reduction of any region throughout Europe. A similar valuation trend was experienced in the Southern region however, average valuations were sub10x for the sixth quarter in a row with deal volumes reducing by nearly a third.

Despite demonstrating a strong quarter on quarter increase in Q1 2020, the DACH region experienced a sharp 5% decline in average valuations in Q2 2020. However, the region experienced the greatest volume of transactions in the quarter, despite only placing third in Q1 2020.

Benelux saw the largest increase in valuations of any region in the quarter, up 6% against Q1 2020 and 12% against the same quarter in 2019, bringing average valuations in the region above 10x for the first time in more than six quarters. In comparison to other regions, Benelux also experienced a modest reduction in deal volume of 16%.

Averages over the last 12 months

Averages over the last 12 months Q2 2020 1

Despite a 28% reduction in deal volumes for the quarter, the TMT sector experienced the largest number of PE-backed transactions for the second quarter in a row. Furthermore, average multiples were richest in the sector for the third quarter in a row, despite a 1% decrease in valuations compared to the preceding quarter and 2% against the same quarter in 2019.

The second hottest sector for the quarter in terms of valuation was healthcare, with valuations remaining well in excess of 10x for the sixth quarter in a row. Despite valuations holding in the sector, volume of deals was down by nearly 50% on the previous quarter and 40% on the same quarter in 2019.

The financial services sector saw a modest reduction in deal volumes

The financial services sector saw a modest reduction in deal volumes in the quarter whilst valuations remained flat versus the previous quarter, despite a 12% reduction against the same quarter in 2019. The financial services sector has often experienced the richest valuations but in recent quarters, TMT has eclipsed the sector with healthcare also continuing to challenge.

Industrials and chemicals and business services both experienced large drops in deal volumes in the quarter, 39% and 41% respectively. However, valuations remained flat in industrials and chemicals whilst business services experienced a 3% increase, both with average multiples in excess of 10x. This was the third quarter in a row that business services endured an increase in average multiples paid in PE-backed transactions.

Last quarter, the consumer sector saw the lowest valuations in six quarters, dropping below 10x for the first time since Q1 2019. This trend continued in Q2 2020 with a further 2% reduction. Deal volumes also dropped 24% in the quarter and 38% versus the same quarter in 2019.

In terms of deal size, and in line with most quarters historically, the largest volume of deals was in the sub €50m category despite a 32% reduction in deal volumes for the quarter. Conversely, the smallest volume of deals was experienced in the >€1bn range.

For the fourth quarter in a row, the richest valuations were seen in transactions >€1bn, despite being down 3% on the previous quarter and for the fifth quarter in a row, transactions between €500m-€1bn endured the second hottest valuations, being over 6% up on the previous quarter.

Deals in the €250m-€500m range showed decreasing valuations of 6% and 9% when compared with the previous quarter and same quarter in 2019 respectively whilst also being the only deal range to experience an increase in deal volumes with more than a 100% increase.

Valuations remained broadly flat in the €50m-€250m deal range despite a reduction in deal volumes of nearly 40%.

In this quarter, the Multiples Heatmap focuses on trends seen in US sponsor activity in Europe and the real estate sector now the effects of COVID-19 have come to fruition.

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