Euro M&A deals slump despite bargain prices

Michael Bow
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MERGERS & acquisitions activity in the Eurozone has fallen to its lowest level in two years despite companies getting cheaper to buy, research figures published yesterday show.

Data compiled by US valuation company American Appraisal shows there were just 2,037 deals across the Eurozone in the first six months of this year, a 27 per cent drop on volumes compared to 2011.

However, the average price to snap up a firm in Europe – calculated as a multiple of a firm’s income – dropped from 8.1x company earnings to 7.6x, according to an average taken on deals the researcher advised on.

The collective value of all Eurozone deals, some $333.3bn (£210bn), also dropped 21 per cent compared to the first half of 2011.

This is in sharp contrast to both America and Asia, which saw an upswing in multiples for the same period.

American Appraisal’s UK managing director Mike Weaver said: “In the absence of a lasting solution to the Eurozone’s debt troubles, legislative uncertainty and financial market volatility are bringing additional stresses to the process of acquiring or selling a business.”

Despite the slowdown in volume and valuation levels in Europe, there were brighter spots in sector terms, with the technology sector remaining resilient to the downbeat environment.

Average technology earning multiples nearly doubled between 2010 and 2011, surging from 7.7x to 14.1x. Consumer M&A deal multiples also increased, from 4.7x to 8.9x.

“We have seen the highest acquisition multiple growth in the technology space, where there is fierce competitive tension between buyers as higher levels of risk are offset by potentially large payoffs.

Cloud technology has seen the strongest growth projection.” Weaver added.