Europe’s Private Equity M&A Roundup – Q1 2019

By Camilla Cameroni, Atul Vyas and Felix Pörnbacher

European PE M&A deal volume has been slightly declining towards the end of Q1 2019 and reported a decline of 8% YoY. Nevertheless, the phenomenon of megadeals is still evident on a volume as well as value basis. The geographic composition of deals changed slightly due to macro-economic pressures.


PE activity in Europe slightly lower, but remains strong

European PE activity (buyouts and exits) has been slowing down on a volume basis for the past four quarters after reaching a post-crisis high in the Q2 of 2018. Nevertheless, the PE market in Europe is still highly active. In the first quarter of 2019, 500 deals were announced, largest part of which are small-cap deals with a valuation of less than €100m (28%). The number of deals decreased by 8% in Q1 2019 from Q1 2018. Not included in our analysis are deals with a disclosed value of less than €10m, which saw a large volume decrease over this period. Since the decrease in deal volume from the above chart comes mainly from the deals with undisclosed deal value, it is likely that the number of deals in the higher value brackets – disclosed and undisclosed – were more or less level.

The overall deal value over the quarters has followed a similar trajectory. In the quarters following the Q2 2018 peak, total deal value decreased, but bounced slightly back from its low point in Q4 2018. Again, be cautious when inferring trends from these measures due to inherent variability and ambiguity induced by the large number of undisclosed deal values.

Megadeals are here to stay

The uplift in PE activity over the past years was strongly driven by megadeals (deals above a valuation of €1bn). This continues to be the case in Q1 2019. There were 13 such deals reported in this past quarter, the same number as in Q1 2018. During the peak in Q2 2018, 19 megadeals were announced. However, the overall value of the megadeals decreased YoY from Q1 2018 to Q1 2019 by 22% (€39.9bn in Q1 2018, €30.9bn in Q1 2019).


The largest deal in Q1 2019 is the announced acquisition of Scout24, accounting for one fifth of the megadeals’ value for the quarter. Hellman & Friedman and Blackstone have offered €5.7bn for the online classifieds group. The second largest deal, worth €3.8bn, is the takeover of RPC packaging group by Apollo. Interestingly, the targets in four out of the top 6 megadeals in Q1 2019 are in the DACH area.

Brexit does not tear down the UK, Germany suffers

The UK and Ireland have historically been the largest PE markets in Europe. This continues to remain the case in Q1 2019. On a volume basis, the region witnessed an increase of its PE activity by 11% from Q1 2018 to Q1 2019. The total deal value also increased compared to Q1 2018 (Q1 2019: €14.4bn), only lower than its 2018 peak in the Q4 (€17.9bn). These numbers are surprising given the uncertainty from the inconclusive Brexit negotiations extending into Q2 of 2019. There seems to be no immediate effect on the PE activity of the current toxic political environment in the UK.


The large number of megadeals in Q1 2019 is the only good news for the DACH region. Overall, PE activity declined in this area on a volume basis by 12% compared to Q1 2018 and by 35% compared to its 2018 peak in Q3. On an value basis, activity dropped in Q4 2018 from €8.2bn the previous quarter to a mere €2.9bn and regained ground in Q1 2019 (€15.6bn) due to the unusually large share of megadeals in the region. However, 2018 was the strongest year in terms of PE activity for Germany since the financial crisis. Therefore, a slowdown can be interpreted as a mere return to more sustainable levels. According to a survey of PE investors conducted by PwC, confidence in the German PE market remains strong, so the numbers should not necessarily interpreted as a bad sign. Interestingly, the Nordics, which have experienced a relatively stable PE activity on volume and value basis in 2018, lost ground in Q1 2019 both in volume (-24%) as well as in value (-73%).

Notable Deals

In the following two deals are examined. The first is the largest LBO in Europe in the Q1 2019, an example of the megadeals driving the PE activity over the past years. The second deal is an example for the large amount of mid-market deals and for the PE activity in the UK despite Brexit.

Hellman & Friedman and The Blackstone Group will acquire Scout24 AG in Europe’s largest LBO

Industry: Online marketplace operator

Date Announced: February 15th, 2019

Size of the Deal: €5.7 billion

Consideration: 100% Cash

Target Advisors:  Citigroup, Gleiss Lutz

Acquirer Advisors:  Morgan Stanley, Allen & Overy

Target Country: Germany

Europe’s largest leveraged buyout of Q1 2019 was announced on February 15th. Hellman & Friedman and Blackstone will buy Scout24, previously owned and taken public in 2015, for €5.7 billion. The acquirers have announced a voluntary public takeover offer for all Scout24 shares with a share price of €46.00. The bid values Scout24 equity at approximately €4.9 billion with an enterprise value of approximately €5.7 billion. The takeover offer represents a 27% percent premium and 25 times forward earnings to Scout24’s valuation in December 2018.

The deal features a substantial premium, high transaction certainty, and a possible strategic value-add for Scout24. Furthermore, Hellman & Friedman and Blackstone are long-term partners of Scout24, as they previously owned shares of Scout24. Thus, the deal is an attractive opportunity as the strategic partnership could turn Scout24 into a leading European digital player.

However, Hellman & Friedman and Blackstone would be lucky to exit at a higher price-earnings ratio in five years’ time. The acquirer is seeking only a majority stake and plans to keep the company publicly traded. Returns will not be turbo-charged by leverage as the sponsors are buying listed shares.

So why are Hellman & Friedman and Blackstone concluding the deal? First, the advisers are likely betting on future earnings of Scout24. In a few years, Scout24’s financial performance and digital market dominance could be worth a lot more than today. Secondly, the LBO industry may simply have run out of easy targets.

Olympus Partners buys DS Smith’s plastics division

Industry: Plastics

Date Announced: March 6th, 2019

Size of the Deal: €518 million

Consideration: 100% Cash

Target Advisors: Slaughter and May

Acquirer Advisors: N/A

Target Country: Great Britain

Packaging company DS Smith Plc announced on March 6th that it reached an agreement to sell its plastics division to PE firm Olympus Partners, as the business suffered higher polymer prices and a lag in price recovery. The €518 million deal represents a multiple of 9.9x EBITDA, based on the past 12 months to 31st October 2018. DS Smith expects net cash proceeds after taxation, transaction adjustments and expenses of approximately €468 million, which will be used to reduce the company’s financial leverage, in line with its target of net debt/EBITDA at or below 2.0x. The sale is expected to result in a substantial exceptional gain and to be marginally EPS dilutive.

Although the deal is still waiting for regulatory approvals and is subject to customary closing conditions, it is expected to be completed in Q2 of 2019.

DS Smith’s flexible plastics, rigid plastics, and foam products division accounts for around 6% of the group’s revenue and it reported a profit before tax for the 12-month period to 31st October 2018 of €33 million (£28 million).

The buyout follows DS Smith’s acquisition of Spanish rival Europac in January. The deal was financed by raising €1.17 million (£1 million) from new shares issued and €740 million from liabilities. Europac acquisition strengthened DS Smith’s position in the paper and packaging industry in the Iberian Peninsula and in France. However, the deal also pushed the company’s debt level to what some thought was uncomfortably high. DS Smith advisors said that the sale will contribute the company progress as a leader in sustainable packaging and will accelerate deleveraging, alongside bringing organic cashflow.

The sale is attractive both financially and strategically as, together with the acquisition of Europac, DS Smith will reinforce its position as a leader in sustainable packaging with a clear focus on the fiber-based business.

Footnote: This report provides an analysis of the PE activity with European involvement (either as acquirer or as target). The data used is based on analysis of announced deal volumes and values as recorded by Zephyr as of April 1, 2018. Where referenced, deal value calculations are based on M&A deals for which value is disclosed – values were not disclosed for nearly two thirds of the analyzed deals, with significant volatility driven primarily by individual high‐value deals. Thus, it is the authors’ view that deal volumes provide the more reliable and meaningful indicator of overall trends in the M&A market, and this forms the basis of our analysis. We excluded deals with a value smaller than €10m from the analysis.

Editor: Stefan Larsen

Authors: Camilla Cameroni, Atul Vyas, Felix Pörnbacher

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