17 November 2016

European Buy & Build activity in the first half of 2016 reaches highest level since 2008

  • Silverfleet’s H1 2016 Buy & Build Monitor reported 325 add-ons, up from 250 in H2 2015
  • Average deal size increases to £53 million, up from £45 million in H2 2015
  • The UK & Ireland was the most active region
  • Add-on activity in Nordic Region nearly doubled while Spain & Portugal more than halved
  • Consistent level of add-on activity outside of Europe

European Buy & Build activity in the first half of 2016 reached its highest level since 2008 with the largest number of deals in the UK and Ireland, according to Silverfleet Capital’s latest semi-annual European Buy & Build Monitor1.

The Buy & Build Monitor, which tracks global add-on activity undertaken by European headquartered companies backed by private equity, identified a provisional total of 325 add-ons in the first half of 2016 compared to the 204 and 250 add-ons recorded in the first and second halves of 2015 respectively.

In the first half of this year the average disclosed value of add-ons was £53 million, up from the average of £45 million in the second half of 20152.

The findings show that add-ons by European private equity-backed companies have risen much faster than the buyout market, which has been almost flat. Historically the volume of add-on deals has been strongly correlated with the volume of private equity funded buyouts in Europe and has broadly tracked the trend in the mid-market M&A index.

The two largest add-on acquisitions were both in financial services; Permira-backed Tilney Bestinvest acquired Palamon-backed Towry in a £600 million transaction while Nordic Capital’s Norway-based Lindorff entered the Spanish property non-performing loans market by adding-on Centerbridge’s Aktua in a deal worth £246 million.

Geographic trends

The UK and Ireland was the most active Buy & Build region in Europe with 57 transactions in the ‘pre-Brexit’ first half of 2016. The biggest increase in Europe took place in the Nordic Region, which saw 53 add-ons, almost double the 28 recorded in the second half of 2015. Sweden was by far the largest contributor to the Nordic figure with 25 add-ons followed by Denmark (14), Finland (eight) and Norway (six).

The largest drop in add-ons took place in Spain and Portugal with only seven transactions in the first half of 2016 compared to 20 in the second half of 2015 and 31 for the whole of last year. Outside Europe, North America continued to be the favourite target for add-ons with 22 deals recorded, over double the number for Asia Pacific (ten). Despite having Latin America’s largest economy and hosting this year’s Olympic Games, only one add-on was completed in Brazil from a total of five in the entire region, a probable reflection of its current political and financial problems.

Buy & Build value creation

Silverfleet partnered with a team from INSEAD to investigate the contribution made by add-on acquisitions to the growth of a business and the investment returns generated.

Its research suggests that while multiple arbitrage3 is often greater for the add-ons than the original platform, but it is however less significant than the add-ons’ potential for EBITDA growth. Less comfort should therefore be taken from any discount in terms of the entry multiple of an add-on.


Commenting on the findings, Neil MacDougall, Managing Partner of Silverfleet Capital said: “The first six months of 2016 have seen a continued increase in Buy & Build activity both in terms of the number of deals completed and their average size.

“In an increasingly expensive but flat buyout market, it’s clear that private equity firms are strongly encouraging their portfolio companies to make add-on acquisitions to help average down high entry prices, drive EBITDA growth and generate investment returns. The benign debt markets over the period no doubt helped to facilitate this increase.

“The UK has been a major contributor to Buy & Build activity so it will be interesting to see what impact the Brexit vote will have on add-on deal flow in the second half of this year.”

Location H1 2014 H2 2014 H1 2015 H2 2015 H1 2016 H2 2015 – H1 2016
(% change)
UK and Ireland 32 52 40 60 57 -5%
Nordic Region 41 41 38 28 53 +89%
France 26 19 23 30 29 -3%
Germany, Switzerland and Austria 15 20 19 26 25 -4%
Benelux 9 15 12 16 15 -6%
Italy 8 9 8 13 14 +8%
Central and Eastern Europe 10 11 11 16 11 -31%
Spain and Portugal 6 10 18 20 7 -65%
South Eastern Europe 2 2 6 0 0 0%
Total Europe 149 179 175 209 211 +1%
North America 19 26 17 21 22 +5%
Asia Pacific 9 14 8 11 10 -9%
Latin America 0 5 2 7 5 -29%
Middle East and Africa 1 1 2 2 2 0%
Total Rest of World 29 36 29 41 39 -5%
Add-ons unreported at 30/6/161         75  
Total Overall 178 225 204 250 325 +30%

Source: Silverfleet European Buy & Build Monitor H1 2016

For the full report, please click here

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 always faced when writing this report is that the data for the last half-year 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. So in our 2015 annual report we, for the first time, made a pro-forma adjustment to include a Q4 number, which was the average of the figure for previous three years (2012-2014) to compensate for the late arrival of data. In retrospect, the adjustment proved to be much too low for the quarter and indeed a similar adjustment was also needed for Q3 2015 for the same reason.

We have therefore decided to use a larger pro-forma increase of 30% for H1 2016 to assess trends as we can now see this is the size of adjustment that would have been required for our H2 2015 pro-forma to have been accurate in terms of add-on volumes.

A pro-forma 75 further transactions have therefore been added to the number reported to date for 2016. 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.

2 Based on the 44 deals with disclosed values reported in the period

3 Multiple arbitrage means the increase in the value of a company between buying and selling linked only to any uplift in the applicable earnings multiple

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