Decrease in buyer appetite for SME companies, yet M&A outlook is optimistic

The challenging economic situation caused another decrease in the average European EBITDA multiple from 5.2 to 5.1, together with a decrease in the number of interested parties. Despite this, the amount of transactions went up and the outlook for H2-2023 is positive.

These are the most important findings of the European M&A monitor, the periodic survey from Dealsuite that looks into M&A market trends in Western Europe. The research was drawn from 1,318 M&A advisory firms that focus on companies with a revenue of €1-200mn.

Slight decrease in EBITDA Multiple
The average EBITDA multiple has decreased from 5.2 to 5.1 in H1-2023. Over all regions, the Software Development sector notes the highest multiple. In the DACH region, this sector has a multiple of 8.7, while in the Netherlands, 6.8 times the EBITDA is paid for a company within the sector. This difference also highlights the benefits of cross-border deals.

Buyers intent decreased, yet remains high
Compared to the same period last year, the average number of interested buyers per firm decreased from 9.1 to 7.8. “A steep decrease, which speaks to the challenging situation some business owners face.” notes Dealsuite CEO, Floyd Plettenberg. “Yet, the number of interested buyers still far outweighs the number of sellers. And while current market conditions influence the general appetite, we see that companies of all sizes are becoming more active in M&A fueled by mid- and long-term trends.’” Plettenberg adds.

AI transforming M&A
Artificial Intelligence (AI) solutions, such as Chat GPT, made their appearance in M&A practice. 7% of advisors currently make regular use of AI to support their M&A activities. And 29% considered using AI, but did not get to so far. 52% of the advisors expect AI to have a strong impact in the upcoming 5 years. New ways of working deepen understanding of potential deal partners in the broader ecosystem, allow for quick access to data and the streamlining of tasks and decrease geographical barriers.

Optimism for H2-2023
Both the amount of buy and sell-side transactions increased in H1-2023 (+7.3% and +7%). 51% of advisors are satisfied with the performance of H1-2023, 49% of advisors express a negative feeling about H1-2023. And while opinions were mixed looking back at the first half of 2023, 66% of advisors share an optimistic expectation for H2-2023.