European Buy-and-build Activity Stays Flat in Q2

Buy-and-build activity within the European private equity market in Q212 remained at the subdued levels seen in the previous quarter, and below even those of a weak H211, according to Silverfleet Capital.

The firm’s quarterly Buy-and-Build Monitor, produced in conjunction with mergermarket, reports that 63 add-ons were completed in both Q1 and Q2 this year and this level was the lowest of any quarter since the nadir in mid-2009. However, the average disclosed value of add-ons rose to £45m in Q2, up 72% from a very modest average disclosed value of £26m in Q1 but still significantly lower than, for example, the average of £70m seen in Q311.

Commenting on the findings, Neil MacDougall, managing partner of Silverfleet Capital, said: “The lower level of buy-and-build activity that we have observed since the real onset of the eurozone sovereign debt crisis in mid-2011 continued through Q212 with overall activity still very subdued and only slightly above the trough seen in mid-2009.

“However, since the European Central Bank’s [ECB] long-term refinancing operations [LTROs] we continue to see renewed interest in leveraged buyouts (LBOs) from a broader range of lenders especially in France and Germany. It is therefore no co-incidence that Q212 saw a notable resurgence of buy-and-build activity in France, especially by French acquirers who completed 10 out of the 13 add-on transactions in that country.

“However, in overall terms it is likely that weakening demand and confidence in both domestic and foreign markets is the main explanation for continuing lacklustre buy-and-build activity in Europe.”

The total of 63 add-ons recorded in both Q112 and Q212 was below the weak Q311 and Q411 add-on levels of 84 and 86 respectively, and the lowest level since Q309, when only 51 add-on acquisitions were completed. Although the average disclosed add-on value in Q212 recovered to £45m, the figure is based on a small number of deals and remains at the lower end of the historic range.

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