Significant differences in European SME valuation with multiples
Multiple ratios are an important tool for professional company valuation. Dealbridge has observed that there are various sources with differing data for the valuation of European SMEs. In a Europe-wide network such as dealbridge M&A advisors, the partners exchange information on these valuation differences. In addition, they help each other with well-founded company value appraisals.
Cross-border M&A transactions between EU countries or neighbouring European countries such as Turkey, Switzerland or the UK therefore require special expertise. Different economic conditions, regulatory requirements and market structures make it difficult to adopt multiples 1:1. Added to this are differences in financial reporting. Differences exist mainly from country to country, but sometimes also for the same national territory, depending on the data provider.
It is also important to choose the right data source: providers such as:
👉 Orbis/Moodys Analytics (formerly Bureau van Dijk)
👉 S&P Capital IQ
👉 Preqin (recently acquired by Blackrock)
👉 Refinitiv (LSEG Data & Analytics;)
👉 PitchBook
👉 Mergermarkets (ION Analytics)
collect their data in different ways - from stock market data and public reports to market surveys or through cooperation with specific M&A advisors.
The form of presentation also plays a role. The NIMBO platform, for example, breaks down its data by country into five large economic sectors with multiples based on EBITC, EBIT, EBITDA and turnover, as well as into four different company sizes according to the number of employees. As an unweighted average of the size classes <6 to 25> and <26 to 99> employees, NIMBO produces the following current (10/2024) EBIT multiples, for example
🇪🇸 Spain: 10.07
🇵🇹 Portugal: 9.10
🇩🇪 Germany: 7.74
🇵🇱 Poland: 5.13
The NIMBO-value for Germany corresponds well with the data from two data providers that are used frequently in the market: FINANCE Magazine currently cites an average of 7.4 for “small caps” (up to €50 million annual turnover) for September 2024; Deutsche Unternehmerbörse DUB also reports 7.4, but as an average of the “maximum multiples”. On the DUB website, however, you can find out free of charge that the minimum values are only 4.4 on average, and 5.9 is calculated over the entire range; at FINANCE it is 5.6 for “Micro-Caps”(<20 Mio.€).
It should also be noted that the multiples of different branches differ considerably from over-all-averages: According to DUB, an SME in the “Consulting Services” sector currently pays a minimum of 3.3 times EBIT, but a maximum of 9.2 times.
Moreover, multiples only ever represent a benchmark. Dealbridge-partner Constantinos from Cyprus comments: “Overall valuation analysts need to conduct continuous research on market dynamics and industry trends to perform their work effectively and bear in mind that one size does not fit all.”
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