30 November 2017
European Buy & Build activity in the first half of 2017 reaches new high
- Silverfleet’s H1 2017 Buy & Build Monitor reports 3201 add-ons, up from the previous high point of 302 in H1 2016
- Nordic region registers highest levels of add-on activity with 24% of the total
- Italy continues to see a rise in add-ons while France records a notable decline
- Average deal value of £92 million is down on 2016 but fourth highest since the GFC
- Add-ons continue to outperform PE buyouts and mid-market M&A
European Buy & Build activity in the first half of 2017 reached its highest level on record,2 up 20% on H2 2016, according to Silverfleet Capital’s latest semi-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 320 add-ons in H1 2017 compared to 302 and 266 add-ons recorded in the first and second halves of 2016 respectively.
The average disclosed value of add-ons in H1 2017 was £92 million, down from the 2016 average of £109.5 million but still the fourth-highest half-year figure since the financial crisis.
The figures show that add-ons by European private equity-backed companies continue to outperform the volume of PE buyouts and mid-market M&A, both of which have remained relatively static by comparison.
The three largest recorded private equity-backed add-ons in H1 2017 were in Business Services, led by Bridgepoint-backed Element Materials Technology’s acquisition of global testing company Exova Group plc for £770 million. Exova was still 54% owned by PE firm Clayton, Dubilier & Rice and this add-on facilitated a full exit for the firm.
The Nordic region returned to being the most active area in Europe with 66 deals, a 47% increase on the 45 completed in H2 2016. Of these, Denmark accounted for 19 add-ons, followed by Finland (17), Sweden (16) and Norway (14).
Despite the uncertainty caused by Brexit, the UK & Ireland performed relatively strongly and was the second most active region in Europe with 53 add-ons, a 5% decline from H2 2016. UK based buyers make up the vast majority of activity, but there clearly remains a sustained level of interest in the market from overseas bidders.
Italy continued to see a rise in activity, with 22 add-ons, up from 20 in H2 2016 and 14 in H1 2016.
France was notably weaker in H1 2017 with 27 add-ons compared to 35 in H2 2016 (a decline of 23%). The cause of this decline is likely to be the uncertainty produced by the French presidential election in May. Central and Eastern Europe registered seven add-ons during the period, a continuation of the weak performance registered in H2 2016 (five).
Add-on activity undertaken outside Europe represented approximately 11% of the total volume. North America was the favourite target with twice as many companies attracting European buyers as Asia Pacific, Latin America and the Middle East and Africa in aggregate.
Silverfleet was an active participant in buy & build activity during the period: its portfolio company Coventya completed two add-ons in Turkey, including the €15 million take private of Borsa Istanbul-listed Politeknik Metal Sanayi ve Ticaret A.Ş.
Commenting on the findings, Neil MacDougall, Managing Partner of Silverfleet Capital said: “Buy & Build activity by European companies backed by private equity is becoming increasingly popular and continuing to forge ahead of mid-market M&A and buyouts. Not only are there more deals being competed in absolute terms but many are strategically significant and are playing a transformative role in generating returns for investors. As valuations continue to remain high and debt is still relatively cheap, add-ons have become a widely used means of averaging down high entry prices and creating value.”