14 November 2018

European Buy & Build activity in first half of 2018 falls as political uncertainty begins to bite

Silverfleet Capital, in conjunction with Mergermarket, today publishes the findings of its European Buy & Build Monitor for H1 2018. The Buy & Build Monitor tracks global add-on activity undertaken by European‑headquartered companies backed by private equity.

Headline findings

  • Silverfleet’s H1 2018 Buy & Build Monitor reports 2871 add-ons, down from 327 in H1 2017
  • Weak add-on activity in the UK & Ireland and the Nordics
  • DACH was the only region to see a rise in add-on activity
  • Total deal value reached £4.1 billion, down from £4.8 billion in H1 2017

European Buy & Build activity in the first half of 2018 fell by 12% compared to the same period in 2017 with Brexit concerns dampening the normally buoyant UK and Irish markets, according to Silverfleet Capital’s 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 287 add-ons in the first half of 2017 with a total deal value of £4.1 billion, down from 327 add-ons worth £4.8 billion recorded over the same period in 2017.

Just eight add-ons with values greater than £60 million or €70 million were announced in the first half of 2017, down from 21 announced over the same period last year.

The largest recorded private equity-backed add-on in the first half of 2018 was TDR-Capital-backed EG Group $2.15 billion acquisition of the convenience store business of The Kroger Co.

Geographic trends

The UK & Ireland and the Nordics saw large falls in activity. Deal volume in the UK & Ireland dropped from 67 in H1 2017 to 50; this trend appears to be driven by the impending Brexit deterring UK companies from pursuing domestic add-ons. The number of UK add-ons by non-UK companies remained steady.

In the Nordic region, only 41 add-ons were completed in the first half of 2017, down from 74 in H1 2017. Sweden saw the highest level of activity with 26 add-ons, but this was offset by Denmark and Norway, which registered only eight deals between them, the latter potentially impacted by low levels of M&A in offshore oil and gas exploration.

The biggest increase in Buy & Build activity was in the DACH region, which continued its recovery with 38 add-ons in H1 2018, up 31% on H1 2017 (29 add-ons) to reach its highest level in recent years.

France, Benelux and Italy saw a dip in performance over the first half of 2018 that broadly reflected the average decline in Europe while data for Spain & Portugal, CEE and SEE was in line with H1 2017.

Add-on activity undertaken outside Europe accounted for 12% of total volume, a similar proportion to previous years. However, there was a notable fall in the number of add-ons in North America compared to previous years while data for other regions was in line with historic trends.

Silverfleet’s buy & build activity in H1 2018 includes French specialty chemicals portfolio company Coventya’s acquisition of a majority stake in Germany-based microGLEIT, a niche supplier of lubricants. This is the third add-on since Silverfleet became a shareholder in May 2016.


Commenting on the findings, Neil MacDougall, Managing Partner of Silverfleet Capital said: “Having reached its highest level on record last year, Buy & Build activity for the first half of this year has been considerably muted, despite a continuation of favourable economic conditions.

“Our view is that politics is at least part of the reason for this sea-change, no more so than in the UK & Ireland, with pre-Brexit caution the strongest explanation for the sharp drop in the number of domestic add-ons. The fall in Buy & Build activity by European companies in North America could be due to the imposition of export tariffs but it’s also possible that domestic US buyers have just been more gung-ho than the Europeans.”

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1 Methodology

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 is usually incomplete, especially as smaller add-ons are less well reported and frequently come to light after the analysis has been completed.

We have therefore decided to apply a pro-forma increase of 14% to H1 2018 volumes to assess trends. From our H2 2017 analysis we can see this is the size of the adjustment that would have been required to have been accurate in terms of add-on volumes.

35 additional transactions (pro-forma) have therefore been added to the H1 2018 reported volumes. Extrapolating this methodology of creating pro-forma numbers to any detailed breakdown of the data such as the regional analysis is however much less straightforward, so we have chosen not to do so.

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