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Signs of life in European industrials M&A

After suffering a sizeable decline in the second quarter of 2020, European industrials & chemicals M&A saw signs of recovery over the summer as economies began to open up.

Many companies were quick to overhaul products and services and streamline operations. Sub-sectors such as robotics and industrial artificial intelligence, in particular, benefitted as companies pushed to revolutionise and implement “Industry 4.0”.

High-value deals and a positive pipeline

There was a total of 270 deals worth a combined €31 billion announced in the third quarter of the year—3.5-times larger than Q2 values of €8.9 billion with 57 more deals. Following a particularly active first quarter, the sector has reached a total of €106.3 billion across 845 deals so far this year, already surpassing the full-year 2019 value of €102.6 billion. Europe now accounts for 40% of the global value in the industrials sector this year, up from 21% in 2019.

There was a clear uptick in higher-value deals over the summer, with nine deals worth at least €1 billion announced in Q3 2020. This included Alstom’s €7.1 billion acquisition of Bombardier Transportation and the €3 billion tender offer for Ahltstrom-Munksjo, both of which were announced in September.

Average EBITDA multiples in the European industrials & chemicals sector have experienced a noticeable decrease in 2020, falling to 10.3x—this compares to an average of 11.4x seen during 2019.

The auction pipeline for the reminder of the year is looking healthy, with corporate disposals featuring prominently. Among the disposal candidates are Siemens’s mechanical drive unit, Flender, Clariant’s pigments unit and Volkswagen’s French luxury automobiles manufacturer, Bugatti.

Several private equity exits are also in the works, including Sagard’s exit from plastic packaging maker Ipackchem Group and Finatem’s sale of German gear components maker, hGears.