Multiples Heatmap: pricing ticks up as GPs flock to safe assets

Unquote and Clearwater International
02 September 2020

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The average multiple paid by private equity firms for European companies increased slightly in Q2, driven by a flight to quality and the scarcity of opportunities, according to Clearwater's latest Multiples Heatmap.

Q1 2020 suffered a slight reduction in deal volume when compared with the same quarter in 2019, with the effects of Covid-19 not yet apparent in market figures. However, with the global situation worsening throughout Q2 2020, the market was substantially impacted, with deals in their infancy put on hold as buyers and sellers alike assessed the unprecedented crisis.

But intense competition for the very few assets that were considered immune (or even expected to benefit from) the pandemic mean pricing remained at a high level in the second quarter. The average entry multiple recorded by Clearwater International and Unquote across European transactions stood at 10.5x EBITDA in Q2, versus 10.3x in the previous quarter and 10.2x in Q2 2019.

Despite a 28% reduction in deal volume for the quarter, the technology, media and telecommunications sector experienced the largest number of PE-backed transactions for the second quarter in a row. Furthermore, average multiples were richest in the sector for the third quarter in a row, despite a 1% decrease in valuations compared to the preceding quarter and 2% against the same quarter in 2019.

The second hottest sector for the quarter in terms of valuation was healthcare, with valuations remaining well in excess of 10x for the sixth quarter in a row. Despite valuations holding in the sector, volume of deals was down by nearly 50% on the previous quarter and 40% on the same quarter in 2019.

Click here to download the Q2 issue of the Multiples Heatmap, including full breakdowns of pricing trends by sector and geography. In addition, this issue also focuses on trends seen in US sponsor activity in Europe and in the real estate sector, now that the effects of Covid-19 have had a measurable impact on dealflow.