What developments did we observe for the trading multiples, the M&A activity and the economy forecasts in the second quarter of 2021?

In this blog edition we present the key highlights of the most recent market developments as of Q2 2021 published in our quarterly Valuation Market Essentials Switzerland. The publication covers market multiples and cost of capital components per sector for the companies of the Swiss All Share Index (except general financial and real estate companies) as well as relevant macro-economic data used in business valuations.

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Trading Multiples Switzerland

When in the first quarter of 2021 we observed an increase in the median trading EBITDA multiples for majority of the sectors, in Q2 2021 the median multiples for the three out of six sectors experienced a decline, while for two sectors the multiples increased.

In the two sectors Industrial goods and services as well as Retail and consumer products, the median EBITDA multiples increased to rounded 15.0x. The increase was mainly driven by expanding market capitalizations for most of the companies (67% of companies in Industrials and 64% for Retail), while EBITDA figures were still based on the financials as of December 2020.

Also, in the sectors Chemicals, construction and materials, Healthcare as well as Media, technology and telecommunication, the market capitalizations increased for most of the companies (65% / 55% / 62% of the companies in the mentioned sectors) as compared to the previous quarter. However, the decline in the share prices for the remaining companies in each sector had a slightly higher impact on the multiples and the removal of some outlier multiples of above 25.0x further led to a decline of the median multiples for those sectors. For the aforementioned reasons, the Healthcare sector experienced the biggest decline in the median multiple from 16.3x in Q1 2021 to 14.5x in Q2 2021.

For the Energy and utilities sector, the median EBITDA multiple remained flat at 11.3x.

EBITDA_trading developments_multiples

Transactions Europe

The European M&A activity improved in Q2 2021 as compared to Q1 2021 in terms of the number of deals. The total number of transactions (M&A deals, which were announced or announced & closed and have published at least one of the Revenue, EBITDA or EBIT multiples) across the six sectors rose to 201 as compared to 170 transactions in Q1 2021 (please note the change of source for data since our previous publication). However, the average deal volume (total deals value/ number of deals) shrunk by 19% during Q2 2021.

The sectors, which witnessed a significant increase in number of transactions were Retail and consumer products as well as Media, technology and telecommunication.

The Retail and consumer products sector experienced a sizeable increase 0f 82% from 23 transactions in Q1 2021 to 42 transactions in Q2 2021. The other sector, Media, technology and telecommunication observed a rise of 29% from 52 transactions in Q1 2021 to 67 transactions during Q2 2021.

In Q2 2021, the top countries in terms of number of deals and location of the target company were the UK (20% of total transactions), followed by Sweden (15% of total transactions) and France (11% of total transactions). 

number of transactions_multiples

Unlevered beta

The median unlevered beta experienced a minor increase in Q2 2021 for Industrial goods and services, Healthcare as well as Chemicals, construction and materials sectors. On the contrary, there was a minor decrease in the median unlevered beta for the Retail and consumer products sector.

Debt to total capital ratio

The median debt to total capital ratio continued the decreasing trend in Q2 2021 for three out of six sectors, which include Retail and consumer products, Industrial goods and services and Healthcare sectors.

The decline in median debt to total capital ratio in those sectors was primarily driven by the expansion of market capitalizations for most of the companies in Q2 2021. At this time, the underlying debt values were still based on the most recently available financials as of December 2020 for most of the companies.

For the sectors Chemicals, construction and materials as well as Media, technology and telecommunication, the increase in share prices of the major part of the companies (62-65%) did not lead to a lower median debt to capital ratio. On the contrary, the decrease in share prices of the minor part of the companies (35-38%) had a stronger effect on the median, leading to an increase in the median debt to capital ratio.

debt to capital ratio_multiples

GDP growth

The GDP growth forecasts for the year 2021 have all increased for Switzerland, Germany, US, emerging markets as well as the global markets during Q2 2021 as compared to the previous quarter.

The long-term GDP growth forecasts (geomean 2021-2030) for Switzerland and the global markets have remained unchanged, while for Germany, the US and the emerging markets the long-term GDP growth forecasts improved slightly during Q2 2021 as compared to Q1 2021.

Banking and Insurance Sector

As opposed to the trend in the previous quarter, in Q2 2021, there was a decline in the median P/TB multiples for Global and private banks, Retail and cantonal banks as well as Insurance companies, mainly driven by the decrease in market capitalization for most of the companies in those sectors. 

For Global and private banks, the median P/TB multiple declined from 1.34x in Q1 2021 to 1.28x in Q2 2021, and for Retail and cantonal banks, the median P/TB multiple decreased from 1.00x to 0.95x in the same period. Similarly, the Insurance companies witnessed a decrease in the median P/TB multiple from 1.28x to 1.08x.

P/TB median development_multiples


Since the beginning of the year, we could observe a trend of decreasing trading EBITDA multiples for the sectors Healthcare and Media, technology and telecommunication. For the sectors Retail and consumer products as well as Industrial goods and services, we observed an opposite trend with improving multiples. On contrary, for Chemicals, construction and materials as well as Energy sectors there was no clear trend (increase in Q1 but decrease in Q2).

Given that the underlying financials were in the most cases unchanged in both quarters, those trends were mainly driven by the movements in the share prices. However, within each sector the movements of the share prices were approximately equally spread in both directions, but with different magnitudes. For valuation purposes it is important to further break down the sector to the best comparable companies to derive an appropriate multiple for a certain target company.

An additional challenge arises while ensuring the comparability between the target and the peers in terms of timing of the underlying financials. Finally, in order to derive reliable valuation results, corporate finance practices and professionals must be aware of the market parameters’ volatility resulting from a fast-changing economic environment.

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