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European Buy & Build activity reaches highest level on record

European Buy & Build activity in 2016 reached its highest level on record with the largest number of deals in the UK & Ireland, according to Silverfleet Capital’s latest annual European Buy & Build Monitor.

The Buy & Build Monitor, which tracks global add-on activity undertaken by European headquartered companies backed by private equity, identified 5371 add-ons in 2016 compared to the 464 and 414 add-ons recorded in 2015 and 2014 respectively.
The average disclosed value of add-ons in 2016 was GBP73 million, up from an average of GBP42 million in 20153.
Historically, the volume of add-on deals has been correlated with the volume of private equity funded buyouts in Europe and has broadly tracked the trend in the mid-market M&A index. The findings in this report, however, show that in recent years a divergence has become apparent, with add-on volumes clearly outperforming buyouts and mid-market M&A.
The largest recorded add-on acquisition in the year was Prague-based Avast Software, a computer antivirus software business backed by CVC and Summit acquiring AVG Technologies, a Netherlands based business with Czech roots, for over USD1.4 billion.
Two further transactions had reported values in excess of GBP500 million. The first saw Scotland-based Siccar Point Energy, a company backed by Blue Water Energy and Blackstone Energy Partners, acquire OMV (UK), a UK headquartered E&P business which was a subsidiary of OMV Aktiengesellschaft for GBP605 million. The second deal involved two UK companies in the wealth management sector where Permira-backed Tilney Bestinvest acquired Palamon-backed Towry in a GBP600 million transaction. 
The UK & Ireland performed strongly and represented the most active region in Europe in 2016 despite concerns regarding the future impact of the Brexit vote in June 2016. The Nordic Region, usually one of the most active areas in Europe, staged a strong recovery in 2016 (40 per cent increase year-on-year) following a significant drop in 2015. This increase was in large part due to a near doubling of add-on volumes in Sweden and Denmark.
Offsetting this increase was Spain and Portugal, which had a very strong period for add-ons in 2015, but was noticeably weaker in 2016 and back in line with 2013 and 2014 volumes. A similar pattern was also apparent in the data for the CEE region.
Overall, activity across Europe was stronger in 2016 (12.4 per cent rise vs 2015) with increased activity also seen in France, DACH, Benelux and Italy.
Add-on activity undertaken outside Europe (12.1 per cent of total volume) appears to have followed its normal pattern with North America as usual the favourite target and over twice as active a region for European companies to buy into as Asia Pacific. 
Neil MacDougall (pictured), Managing Partner of Silverfleet Capital, says: “2016 saw Buy & Build activity in Europe reach pre-2008 financial crisis levels both in terms of the number of deals completed and their average size. 
“In a buyout market where acquisition multiples have been steadily increasing, the findings clearly demonstrate that private equity firms view Buy & Build as a key component of their value creation strategy, making add-on acquisitions to help average down high entry prices and drive EBITDA growth. While this phenomenon has long been anticipated it is only relatively recently that it has clearly started to show up in the data.”

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