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28 April 2016

European Buy & Build activity in 2015 reaches highest level since 2011

  • Silverfleet’s 2015 Buy & Build Monitor reported 404 add-ons, up from 393 in 2014
  • Q3 2015 saw 125 add-ons, the highest quarterly number since 2008
  • The UK & Ireland was the most active region and saw a 5% increase on 2014
  • Add-on activity in Spain & Portugal more than doubled while deals in the Nordic Region dropped significantly
  • Add-on activity also fell in North America and Asia Pacific

European Buy & Build activity in 2015 reached its highest level since the first half of 2011, according to Silverfleet Capital’s annual European Buy & Build Monitor.

The Buy & Build Monitor, which tracks global add-on activity undertaken by European headquartered companies backed by private equity, identified a provisional total of 404 add-ons in 2015 compared to 393 in 20141.

In Q3 2015 there were 125 add-ons reported, the highest total recorded in a single quarter since Q2 2008 with 143 transactions. The average disclosed value of add-ons in 2015 was £40.5 million2. The largest add-on by a considerable margin at $830 million, was in the customer care outsourcing industry where Groupe Acticall, backed by Creadev – a private equity fund controlled by the Mulliez family - acquired major competitor, SITEL, which employs more than 60,000 people in over 100 centres across 21 countries.

Geographic trends

Buy & Build activity in the UK and Ireland performed strongly in 2015 with 86 transactions, an increase of 5% since 2014. The largest increase in Europe took place in Spain and Portugal, where the economic recovery resulted in 31 add-ons in 2015, over double the 2014 total of 15 and significantly up on the three year average.

The Nordic Region, usually one of the most active areas in Europe, saw a 29% fall in Buy & Build transactions in 2015 compared to 2014, possibly due to the economic headwinds currently facing Finland and Norway.

Add-on activity undertaken outside Europe fell back noticeably in North America and Asia Pacific (down 30% and 27% since 2014 respectively) but this appears to be a return to more normal levels. Nevertheless North America maintained its position as the favourite place in the rest of the world for add-ons by European companies.

Add-ons by platform and value creation

In this year’s report Silverfleet looked in detail at the number of add-ons completed by each platform to see how these are distributed. In total 589 platforms were active in the three year period 2013-15 and these had made, by the end of 2015, 1,159 add-ons resulting in an average number of add-ons per platform of close to two. According to the report, 71% of the add-ons completed over that period were completed by platforms that are classified as either ‘Active buyers’ or ‘Portfolio builders’, which are more likely to create shareholder value than ‘One-timers’3.

Comment

Commenting on the findings, Neil MacDougall, Managing Partner of Silverfleet Capital said: “The continued recovery in Buy & Build activity levels, notably in Iberia but also in Italy is now clearly visible and more than offsets a weak year in the Nordic markets. The UK and Ireland was the most active region and seven of the 12 deals over £60 million were completed by UK-based platform companies. Our analysis of active platform companies starts to show why Buy & Build is so popular with private equity GPs and LPs and we expect this trend to continue over 2016.”

Location20122013201420152014-15
(% change)
UK and Ireland 63 61 82 86 5%
Nordic Region 49 62 79 56 29%
France 41 34 45 45 0%
Germany, Switzerland and Austria 45 41 34 38 12%
Benelux 29 26 23 26 13%
Spain and Portugal 13 18 15 31 107%
Central and Eastern Europe 12 19 21 20 -5%
Italy 11 12 17 20 18%
South Eastern Europe 4 3 4 5 25%
Total Europe2672763203272%
North America 24 23 44 31 -30%
Asia Pacific 15 15 22 16 -27%
Latin America 4 7 5 5 0%
Middle East and Africa 2 3 2 4 100%
Total Rest of World45487356-23%
Estimated residual deals1       21  
Total Overall3123243934043%

Source: Silverfleet European Buy & Build Monitor 2015

For the full report, please click here

Methodology

1 The data used in the Silverfleet Buy & Build Monitor is prepared by mergermarket. It only includes add-on acquisitions made by companies where more than 30% of their equity is held by a private equity fund and where the platform business is a European headquartered company. The value of the add-on needs to exceed €5 million or the target should have at least €10 million of sales to be included.

One challenge that we always face when writing this report is that the data for the last quarter being reported on is usually incomplete, especially as smaller add-ons are less well reported and frequently come to light well after we have completed our analysis.

To analyse the trend in overall add-on activity we have for the first time made a proforma adjustment to include a Q4 number, which is the average of the figure for last three years (2012-2014) to compensate for the late arrival of data. We have therefore added a proforma 21 further transactions to the number reported to date for 2015. Extrapolating this methodology of creating proforma numbers to any detailed breakdown of the data such as the regional analysis is less straightforward, so we have chosen not to do so.

2 Based on the 69 deals with disclosed values in 2015. This is below the average of £69.3 million for the 77 deals with disclosed values announced in 2014.

3 These categorisations were made by The Boston Consulting Group in a report entitled “From Buying Growth to Building Value – Increasing Returns with M&A”, published in October 2015. “Active buyers” perform focused M&A to fill gaps and execute deals on a regular basis. “Portfolio builders” are serial acquirers either consolidating an industry or expanding geographically through acquisition. The third categorisation, “One-timers”, acquire rarely and opportunistically.