The average sale price of an SME business was around 2.5 million euros over the past six months. Almost one in five businesses was even sold for more than 10 million euros. In all sectors, sales prices increased slightly in the first 6 months of this year.
This is one of the results of the Brookz Takeover Barometer, the periodic research of takeover platform Brookz, on figures and trends in the takeover market. The survey was conducted among 214 merger & acquisition advisory firms (approx. 900 advisers) which together represent more than 90 percent of the SME takeover market (businesses with revenues between 0.5 and 25 million euros).
Rising sales prices
This survey captured 369 sales transactions from the past 6 months. Of these, just over half had a deal value (sales price) of 2.5 million euros or more: 21% had a deal value between 2.5 and 5 million euros, 10% between 5 and 7.5 million euros, and 7% between 7.5 and 10 million euros. 17% of SMEs sold a business for more than 10 million euros. The report also shows that sales prices increased in all sectors except retail over the past six months. Businesses in IT & Online were valued highest at over 6 times gross profit.
Construction & Installation Engineering
The value of businesses in the Construction & Installation Technology sector increased the most in relative terms, now notching nearly 4x gross profit. According to Floyd Plettenberg, partner at Brookz and responsible for the Takeover Barometer, this increase in the value of businesses in the construction sector is not surprising: 'The construction sector has been on the rise for some time, which is now also having its effect on the prices paid for businesses in that sector. Construction companies that narrowly survived the crisis are opting to sell now that the value of their businesses has risen slightly again. This is also evident from the sharp increase in the number of transactions in this sector; namely 60% more transactions than in the period before.'
Outlook
The number of transactions increased 5% in the first 6 months of 2017 compared to the last 6 months of 2016 and the outlook for the second half of 2017 is positive. Eighty percent of acquisition advisory firms expect the SME acquisition market to remain stable or continue to pick up over the next 6 months. A minority of 10 percent expect the market to deteriorate, up from 12 percent 6 months ago. Expressed as a report grade, acquisition advisory firms give a 7.8 for the expected acquisition climate in the second half of 2017, compared to a 7.6 for the first six months of 2017.
EBITDA Multiples by Sector — H1 2017
| Sector |
Multiple H1 2017 |
Adjustment compared to H1-2016 |
| IT & Online |
6,05 |
+0,15 |
| Healthcare & Pharmacy |
6,0 |
+0,05 |
| Wholesale |
5,65 |
+0,05 |
| Agri & Food |
5,45 |
+0,05 |
| Industry & Manufacturing |
5,2 |
+0,1 |
| Business services |
4,9 |
+0,05 |
| Media, Advertising & Communications |
4,65 |
+0,05 |
| Hospitality, Tourism & Recreation |
4,0 |
+0,05 |
| Construction & Installation Engineering |
3,95 |
+0,15 |
| Automotive, Transportation & Logistics |
3,7 |
+0,05 |
| Retail |
3,65 |
— |
| Average |
4,8 |
— |
Survey date: end of H1-2017. Adjustment is relative to the multiple from the H1-2016 Barometer. Average as stated in the report. Source: Brookz Takeover Barometer H1-2017 (September 2017).
Summary
- In H1-2017, 256 acquisition transactions (+5%) and 369 sale transactions (+4%) were facilitated, adjusted for the difference in response rates compared to H2-2016.
- More than half of all transactions had a deal value above €2.5 million; only 17% exceeded €10 million.
- At 21%, the business services sector accounted for the largest share of acquisitions ever recorded in this study.
- Construction & Installation Technology showed the strongest sector growth: 60% more transactions than in H2-2016.
- The average time from mandate to closing was 9.2 months; from the signing of the Letter of Intent to closing, the average was 3.4 months.
- IT & Online became the highest-valued sector for the first time (multiple of 6.05), surpassing Healthcare & Pharmaceuticals.
- More than half of the businesses (51%) were sold to a strategic buyer; in nearly 30% of the transactions, an investment firm was involved on the buyer’s side.
- An earn-out arrangement was used in 44% of the transactions, with an average term of 25 months and typically representing 10 to 30% of the deal value.
