DACH: More transactions in H2 2019

The second half of 2019 saw sell-side transactions in the DACH market increase with 34% compared to the first half of 2019. Over the same period, transactions on the buy-side decreased by 15%. Industry & Production is still the industry where most transactions take place (30%). Conversely, transactions in the healthcare industry decreased by 7% compared to H1 (from 13% to 6%). Transactions in the corporate services industry decreased by 5% compared (from 14% to 9%).

These numbers and trends are taken from the third Dealsuite M&A Monitor for the DACH SME middle market. They are based on a survey that was conducted among 312 M&A consulting firms that are active in the DACH SME market. The aim of the Monitor is to offer regular insights from the market. These lead to more transparency and serve as a benchmark for everyone working in the M&A market.

Multipliers vary significantly

The survey also shows that a sales price of 5 million euros is the median of the DACH SME M&A market. Around 70% of all transactions accompanied by an advisor during H2-2019 had a price of over € 2.5 million, 20% of the transactions were in the € 2.5 to € 5 million sales price segment, and € 10 million was exceeded in 1/3 of the cases.

The average multiplier across all industries is 5.9, but multipliers vary significantly across industries. The outliers are Retail on one end (4.2) and IT Service Providers & Software Development (8) on the other. Only in the Automotive industry multipliers declined slightly (by 0.1).

M&A as strategy

The M&A professionals that participated in our survey agree that companies with revenue of more than € 10 million should have an M&A strategy and that M&A is a strategic topic for any company. In reality, this is probably not the case. One third of the respondents estimate that no more than 20% of the DACH-companies have an M&A strategy.

At Dealsuite, we advocate that every company should have an M&A strategy that is set out in a strategy document or annual plan. Obviously, this does not mean that a business has to pursue acquisitions every calendar year. It can also be a strategic decision not to do so.

Outlook

We asked the M&A consulting firms to rate the market on a scale of 0 to 10 (where 0 corresponds to a very bad forecast and 10 to a very positive outlook). This rating is based, among other things, on the number of entrepreneurs who want to sell their company, the ease of obtaining financing and macroeconomic developments. For H2-2019 this rating was 7.1. A stable, slightly declining market is expected for the next six months (rating: 6.8), though it should be noted that the survey was undertaken before the unrest caused by the outbreak of the novel coronavirus.

Author: Rob Hartgers