Interesting article from Anne Drif published on May 12th, 2020 in the French newspaper Les Echos: according to Refinitif, median companies' acquisition multiples would have declined from 11.3 x EBITDA last year to a current 10.7 x due to the sanitary crisis, with multiples coming back to their 2014 levels. The decline in Europe would be even stronger, from 10.2 x EBITDA last year to a current 8.8 x.
In a "normal" adjustment situation, the drop in companies' profitability is more or less offset by enterprise values' decrease, leading to acquisition multiples globally unchanged. If the market is convinced that profitability drop is temporary, acquisition multiples could even increase as enterprise values are less impacted than temporary aggregates.
In the current situation, the drop in companies' profitability aggregates is more than offset by enterprise values decrease, showing that the sanitary crisis is not perceived as a temporary one-off: profitabilities should not recover short-term, and company valuations have been strongly revised down due to lack of clear economic perspectives.
This will certainly lead to interesting valuation / M&A discussions in the coming months ....
