In the capricious year of 2020, scale consolidation and distressed M & A brought on by the COVID-19 pandemic did not cause elevated PE buyout valuations to decline as expected. Valuations remained lofty and varied greatly by region.
This analyst note will provide background on the key drivers of buyout multiples, as well as explore differences in valuations across Europe and the US over the past decade. Key takeaways include:
For the first time in over a decade, 2020 saw considerable divergence in buyout multiples between Europe and the US.
The valuation mix is shifting across both the US and Europe, with greater proportions of transactions being priced between 10.0x and 14.9x in Europe, whereas the US saw a record percentage of deals valued between 15.0x and 19.9x.
Buyout valuations in the UK, France, and Germany have displayed convergence in the last three years, with UK prices falling while the latter two regions saw increases.
We expect European valuations to track higher during the next 12 months—although still being comparatively lower than the US—as investors look through the uneven pandemic recovery.