Disparity in EBITDA multiples fuels cross-border M&A

November 18, 2021 Jelle Stuij
Head of Marketing & Operations

Amsterdam, 18 November 2021 - A significant difference in EBITDA multiples across Europe is helping to encourage cross-border M&A.

Research by Dealsuite reveals that mid-market companies in the DACH region (Germany, Austria and Switzerland), for example, are valued 19% higher on average than those in the Netherlands — an Ebitda multiple of 5.82 compared to 4.88.

Understanding these significant valuation differences across Europe can help buyers and sellers to pursue cross-border opportunities.

Sellers in some countries may be able to achieve higher valuations by seeking cross-border buyers, and companies on the lookout for acquisitions may find better value across borders instead of locally.

Cross-border differences

Cross-border differences are particularly evident in certain sectors. French retail companies, for example, are valued at 5 times Ebitda, compared to just 2.95 times in the Netherlands.

In construction and engineering, DACH companies are valued more than 50% higher than their peers in France. In both cases, there are opportunities for cross-border M&A to take advantage of these differences for the benefit of both buyers and sellers.

Significant valuation differences exist even in sectors where M&A activity has been high during the past year. Companies in the IT services and software development have the highest average valuations, but this varies from 8.65 in the UK&I and 8.25 in DACH, to 7.5 in France and 6.55 in the Netherlands.

comparison

A similar pattern of cross-border valuation differences is also evident in healthcare and pharmaceuticals, and business services. In these industries, Dutch sellers may find much better offers from international buyers than are available domestically, while companies in the UK&I and DACH might benefit from looking to buy in the Netherlands.

A notable shift from this pattern is evident in the industrial and manufacturing sector, where companies in the UK&I are valued much lower (4.5) than their peers in Germany (6.15), the Netherlands (5.35) and France (5.15).

Unlocking value

Smaller companies in general have a lower EBITDA multiple than bigger companies. This, among other reasons, is because of a higher risk premium which results in a value-reducing effect. Nowadays, many large corporations are moving down to the lower-mid-market to scout for acquisition targets.

Lack of transparency

The geographical differences in EBITDA multiples can mainly be accounted to a lack of transparency. With the rise of online dealsourcing solutions however, a better overview of the market is now available. Allowing for better benchmarking and spotting more deals.

Dealsuite is an invite-only sourcing solution which provides a better overview of the market together with access to a network of M&A professionals. Dealsuite makes it easier to do more and better (cross-border) deals.