Over the past six months, demand for businesses has remained as high as ever. In all sectors, demand exceeds supply. On average, for an SME business in the shop window, there are currently 6 seriously interested buying candidates.
This is one of the results of the Brookz Takeover Barometer, the periodic research by takeover platform Brookz on figures and trends in the takeover market. The survey was carried out among 265 merger & acquisition advisers (approx. 1,200 advisers) who together represent more than 90% of the SME takeover market (businesses with revenues between 0.5 and 25 million euros).
Most buyers for IT & Online businesses
For IT & Online businesses, most buyers are lining up. On average, for an IT & Online business on sale, there are at least 10 seriously interested buying candidates. Other high interest sectors include Manufacturing & Production (average 8.1 buy candidates), Healthcare & Pharmaceuticals (average 7.4 buy candidates) and Business Services (average 6.7 buy candidates). Sectors with the least average interest are businesses in the Retail Trade sector (3.2 buy candidates), Hospitality, Tourism & Recreation (4.6 buy candidates) and Automotive, Transport & Logistics (4.8 buy candidates).
Ultimate selling moment
Although the number of transactions in the past six months was the highest ever, it did not increase further compared to the previous period. In the previous Barometer, an increase of 11% was recorded compared to the previous half year; now the increase is zero. So the top seems to have been reached. Floyd Plettenberg, partner at Brookz and responsible for the Takeover Barometer, analyzes, "The number of transactions has remained constant in the past half year, but the takeover prices paid have increased again in that period. This indicates the slow emergence of scarcity in supply. The high number of interested parties per business supports that statement. You could speak of an ultimate sales moment from a market perspective."
EBITDA Multiples by Sector — H1 2018
| Sector |
Multiple H1 2018 |
Adjustment compared to H2-2017 |
| IT & Online |
6,2 |
+0,1 |
| Healthcare & Pharmacy |
6,0 |
— |
| Wholesale |
5,65 |
— |
| Agri & Food |
5,55 |
+0,05 |
| Industry & Manufacturing |
5,3 |
+0,05 |
| Business services |
5,0 |
+0,05 |
| Media, Advertising & Communications |
4,65 |
— |
| Construction & Installation Engineering |
4,1 |
+0,05 |
| Hospitality, Tourism & Recreation |
4,0 |
— |
| Automotive, Transportation & Logistics |
3,8 |
+0,05 |
| Retail |
3,65 |
— |
| Average |
4,95 |
— |
Survey date: end of H1-2018. Adjustment is relative to the multiple from the H2-2017 Barometer. Average as stated in the report. Source: Brookz Takeover Barometer H1-2018 (September 2018).
Summary
- In H1-2018, 316 acquisition transactions and 442 sale transactions were facilitated; adjusted for the expanded respondent group, the average number of transactions per office remained unchanged (0%)—the market stabilized at a high level.
- The share of transactions in Construction & Installation Technology rose by 3 percentage points to 11%, while IT & Online actually fell by 3 percentage points to 14%.
- The IT & Online sector saw the largest increase in the EBITDA multiple: from 5.5 in H1-2015 to 6.2 in H1-2018, partly due to a tighter supply of businesses in that sector.
- Company size has a significant impact on valuation: the multiple for businesses with normalized EBITDA of €250,000 was 0.25 below the average, compared to +0.25 for businesses with €5 million in EBITDA—a difference of more than 10%.
- On average, there were 6.3 serious prospective buyers per business sold; in the IT & Online sector, that number was 10, compared to just 3.2 in the Retail sector.
- According to 77% of advisers, strategic buyers paid an average of 18% more than private equity firms for the same company.
- In 1 out of every 5 sales transactions (20.4%) in H1-2018, a private equity firm was the buyer.
- Sentiment remained positive: the rating for H1-2018 was 7.6, with an expected rating of 7.7 for H2-2018; only 7% expect a decline.
