Multiples Heatmap: average entry multiple hits 10.5x as dealflow recovers

Unquote and Clearwater International
20 November 2020

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In Q3 2020, average multiples paid in private-equity-backed transactions throughout Europe increased slightly when compared with the previous quarter, with deal volume increasing 58%, according to the latest Clearwater Heatmap.

The deals market was substantially impacted in Q2 2020 as deals in their infancy were put on hold to wait out the unfolding situation across the globe. However, Q3 2020 marked a rebound in activity with record levels of deal completions. High-quality businesses in resilient sectors such as healthcare/pharma services and TMT were highly sought after by the European PE market as the globe emerged from lockdown and PE looked to deploy capital, increasing valuations in these thriving sectors.

The UK and Ireland was the hottest region for multiples in the quarter, also seeing the largest increase in valuations of any region, up 4% against Q2 2020 and against the same quarter in 2019, bringing average valuations in the region above 11x. The UK also experienced a substantial increase in deal volume of 80%, although volume remains lower than the same period in 2019 and average pre-Covid-19 activity levels.

France saw one of the largest increases in valuations during the quarter, up 2% against Q2 2020 and up 8% in comparison to the same quarter in 2019, bringing the valuations above 11x. France also experienced a 70% increase in deal volume in comparison to Q2 2020, bringing the volume average close to pre-Covid-19 activity levels.

The TMT sector experienced the largest number of PE-backed transactions for the third quarter in a row as the resilience of the sector continues to attract interest from PE looking to deploy capital. Despite a 2% decrease in valuations compared to the preceding quarter, valuations have remained in line with the same period in 2019.

The hottest sector for the quarter in terms of valuations was financial services, with valuations increasing 8% in comparison to the previous quarter and 15% when compared to Q3 2019. Deal volume in the sector also increased by 40%, although down on the same period in 2019.

Click here to download the full Q3 2020 Clearwater Heatmap