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07-07-2017 - - 0 comments
Silverfleet Capital: European Buy && Build activity reaches highest level on record in 2016

European Buy & Build activity in 2016 reached its highest level on record2 with the largest number of deals in the UK & Ireland, according to Silverfleet Capital’s latest annual European Buy & Build Monitor1.
 
The Buy & Build Monitor, which tracks global add-on activity undertaken by European headquartered companies backed by private equity, identified 5371 add-ons in 2016 compared to the 464 and 414 add-ons recorded in 2015 and 2014 respectively.
 
The average disclosed value of add-ons in 2016 was £73 million, up from an average of £42 million in 20153.
 
Historically, the volume of add-on deals has been correlated with the volume of private equity funded buyouts in Europe and has broadly tracked the trend in the mid-market M&A index. The findings in this report, however, show that in recent years a divergence has become apparent, with add-on volumes clearly outperforming buyouts and mid-market M&A.
 
The largest recorded add-on acquisition in the year was Prague-based Avast Software, a computer antivirus software business backed by CVC and Summit acquiring AVG Technologies, a Netherlands based business with Czech roots, for over $1.4 billion.
 
Two further transactions had reported values in excess of £500 million. The first saw Scotland-based Siccar Point Energy, a company backed by Blue Water Energy and Blackstone Energy Partners, acquire OMV (U.K.), a UK headquartered E&P business which was a subsidiary of OMV Aktiengesellschaft for £605 million. The second deal involved two UK companies in the wealth management sector where Permira-backed Tilney Bestinvest acquired Palamon-backed Towry in a £600 million transaction. 
 
Geographic trends
The UK & Ireland performed strongly and represented the most active region in Europe in 2016 despite concerns regarding the future impact of the Brexit vote in June 2016. The Nordic Region, usually one of the most active areas in Europe, staged a strong recovery in 2016 (40% increase year-on-year) following a significant drop in 2015. This increase was in large part due to a near doubling of add-on volumes in Sweden and Denmark.
Offsetting this increase was Spain and Portugal, which had a very strong period for add-ons in 2015, but was noticeably weaker in 2016 and back in line with 2013 and 2014 volumes. A similar pattern was also apparent in the data for the CEE region.
Overall, activity across Europe was stronger in 2016 (12.4% rise vs. 2015) with increased activity also seen in France, DACH, Benelux and Italy.
Add-on activity undertaken outside Europe (12.1% of total volume) appears to have followed its normal pattern with North America as usual the favourite target and over twice as active a region for European companies to buy into as Asia Pacific. 
 
Comments
 
Commenting on the findings, Neil MacDougall, Managing Partner of Silverfleet Capital said: “2016 saw Buy & Build activity in Europe reach pre-2008 financial crisis levels both in terms of the number of deals completed and their average size. 
 
“In a buyout market where acquisition multiples have been steadily increasing, the findings clearly demonstrate that private equity firms view Buy & Build as a key component of their value creation strategy, making add-on acquisitions to help average down high entry prices and drive EBITDA growth. While this phenomenon has long been anticipated it is only relatively recently that it has clearly started to show up in the data.”

Location of target add-on 2013 2014 2015 2016 2015-16 (% change)
UK & Ireland 63 86 102 111 9%
Nordic Region 62 85 68 95 40%
France 35 49 56 62 11%
Germany, Switzerland and Austria 42 35 46 61 33%
Benelux 26 24 29 43 48%
Italy 12 17 23 33 43%
Spain and Portugal 18 16 38 20 -47%
Central and Eastern Europe 19 21 27 17 -37%
South Eastern Europe 3 4 6 2 -67%
Total Europe 280 337 395 444 12%
North America 23 46 38 39 3%
Asia Pacific 15 24 18 15 -17%
Latin America 7 5 8 8 0%
Middle East and Africa 3 2 5 3 -40%
Total Rest of World 48 77 69 65 -6%
Estimated residual deals1


28
Total overall 328 414 464 537 16%

Source: Silverfleet European Buy & Build Monitor 2016
 
For the full report, please click here http://www.silverfleetcapital.com/assets/filemanager/content/buy-and-build-monitor/2016_buy_and_build_report.pdf

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