European Insights Webinar, Spring 2021: Key Takeaways from our Capital Advisory, M&A, and Valuations & Opinions Groups

May 2021

With one quarter of 2021 under our belts, Lincoln’s capital advisory, M&A and valuation & opinions professionals convened in a recent webinar to discuss current trends and their outlook for the remainder of the year.

While we have seen some regional differences across continental Europe as compared to the UK, overall stable private company financial performance and increased private credit fund activity indicate the availability of debt financing in support of private company transactions. Private equity activity remains robust throughout Europe with record deal volume anticipated. Valuations are at all-time high multiples, in particular for pandemic-resilient businesses, but inflation and default concerns bear continued monitoring.

Capital Advisory

In the European leveraged markets, pandemic recovery is ubiquitous as leveraged loan volume exceeds pre-COVID levels and debt financing remains available across sectors in the middle market. Borrower friendly market conditions for loans and bonds in Q1 2021 have driven intense activity in European leveraged markets.

Banks and debt funds plan to stick to their strategy to address concerns from the pandemic, indicating their confidence in the strong debt markets. 2021 will be a unique year in which a strong M&A financing market and increased restructuring activity occur simultaneously. The benign debt markets will continue to support M&A activity, though COVID-19 will add a layer of complexity to these transactions. Private debt stands to gain further market share throughout 2021.

Mergers & Acquisitions

Strong M&A momentum carried through Q1 2021, continuing the rebound of deal activity following the lull at the start of the pandemic. Recession resilient sectors continued to see high levels of M&A while sectors that saw a slump in 2020 began to rebound. The booming SPAC market and record levels of dry powder in private equity fueled deal making.

The economic outlook in Europe remains stable through 2022, which will allow management teams to develop credible business plans and continue to close M&A deals quickly. As nations press forward with vaccination rollout and economic recovery continues, Lincoln expects strong fundamentals in the remainder of 2021. However, the effects of rising inflation and fiscal stimulus coming to an end remain outstanding questions for buyers and sellers this year.

Valuations

According to Lincoln’s proprietary database of private companies, enterprise value multiples across industries are at all-time highs, seeing a strong return after pandemic-induced lows in 2020. Looking ahead, private companies forecast strong EBITDA growth within their portfolios from add-on acquisitions and organic growth.

The vast majority of private equity investors in Europe are not considering COVID-related addbacks or EBITDA adjustments, but rather looking at earnings on a true last twelve month basis. Average EBITDA growth across industries is expected to be healthy throughout 2021, though there are a few surprises. Companies Lincoln covers forecast roughly flat EBITDA growth for technology as reinvestment occurs and EBITDA is driven down within those businesses.

To learn more about the trends impacting debt financing, M&A and valuations across Europe throughout 2021, please submit a request below to access the full recording of Lincoln’s recent webinar.

 

Please complete the form below to request access to this recording


Summary

  • On Wednesday, April 28, 2021, Lincoln International's Valuations & Opinions Group, hosted a webinar to discuss proprietary insights sourced from private companies into Q1 2021 valuations alongside forecasts for the year ahead.

  • Sign up to receive Lincoln's perspectives

Contributors

Meet Professionals with Complementary Expertise

Related Perspectives

Lincoln’s Middle Market Valuations Database Request

Every quarter, Lincoln’s Valuations & Opinions Group values between 1,600 to 1,800 privately held companies owned by private equity groups. At the end of every quarter Lincoln anonymizes and aggregates… Read More

CFO Dive | Despite Gains in Hard-Hit Sectors, Be Realistic on Valuations

Originally published by CFO Dive on April 14, 2021. The outlook across sectors is better than expected, but forecasts must be achievable. When the pandemic began, CFOs tended to be… Read More

Software Financings and the Rise of the Non-Bank Lending Market

On Wednesday, April 14, 2021, Lincoln International hosted a webinar to discuss the latest trends in software financings. With a shift in the market towards non-bank lenders, software businesses that… Read More

As the British Palate Diversifies, Investors Capitalize on South Asian Food Supplier Sector

While the UK’s grocery market has experienced little growth in recent years, the authentic South Asian cuisine market—offerings that incorporate ingredients, spices and food staples from India, Pakistan and Bangladesh—has… Read More