European overview

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Q2 2019 saw a 2% decrease in Last 12 Months (LTM) average multiple for PE-backed transactions across Europe when compared to Q1 2019, but at a consistent level to multiples seen in the same quarter in 2018.

As the table below shows, for the sixth quarter running, the highest LTM average valuations for PE backed transactions were seen in the Nordic region, despite a 3% reduction on the previous quarter.

The UK and Eire and the Southern regions saw LTM average multiples remain broadly flat with the UK and Eire experiencing the second highest average multiple of any region.

The DACH, French and Benelux regions each saw a 2-3% decline in LTM average multiples compared with the previous quarter. This represents a continuing steady decline in Benelux region for the past 6 quarters, and in DACH for the past 4 quarters.

Central and Eastern Europe saw the lowest valuations with an LTM average multiple of 9.0x, down 8% on the previous quarter. The average is also down 16% on the same quarter in 2018.

MHQ2 Table1

Sector wise, the richest valuations were seen in Financial Services for the third consecutive quarter. The average LTM multiple was up 1% on the previous quarter but 21% up on the same quarter in the previous year.

The Automotive sector also saw a small 1% increase in LTM average multiple versus Q1 2019, and demonstrated continuing valuation stability over the past 4 quarters.

The Food and Beverage sector replaced Automotive as the best value sector, with LTM average multiples falling by 5% in the quarter and steadily declining by 14% over the past 6 quarters.

TMT sector also saw an LTM average multiple decline of 5% in the quarter, taking valuations back to the levels seen in early 2018.

There were small decreases in average LTM multiples in Q2 2019 for Business Services and Industrials and Chemicals with each seeing just a 1% decrease versus the prior quarter. However, the decline when compared to the same quarter in 2018 was more significant, with drops of 5% and 4% respectively.

MHQ2 Table2

In terms of deal size in Q2 2019, the richest valuations were seen in transactions >€1bn, with an average LTM valuation of 13.1x which is up 9% on the previous quarter.

In the previous quarter, deals in the €500m-€1bn range saw the highest average LTM multiple but in Q2 2019, this was only the second highest deal range, despite a 3% increase against the previous quarter.

Transactions in the three sub €250m categories all saw 1% reductions in average LTM valuation when compared to Q1 2019 and the €50m-€100m saw the lowest average valuation of any category.

The largest drop in average LTM multiple was experienced in the €250m-€500m category with a drop of 7% versus the previous quarter in addition to a 5% drop when compared to the same quarter in 2018.

MHQ2 Table3

This month the Heatmap focuses on the Nordic region and the Industrials and Chemicals sector.

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