In 2020, the number of international M&A transactions worldwide fell by almost a quarter (24%). In 2021, the trend is rising once again with a 3% growth in the number of transactions and a significant increase in the average transaction value. In this context, the mid-market segment of medium-sized companies has held up well since the start of the pandemic and is therefore following the general macroeconomic trend. This is in contrast to acquisitions of SMEs by international players. In this segment, the acquisition peak from the pre-coronavirus period in 2021 was no longer matched and the number of acquisitions fell by a further 25% compared to 2020.
This is evident from the publication of the first Moore-Vlerick Cross-Border Mid-Market M&A Compass for cross-border mergers and acquisitions of medium-sized companies. On behalf of Moore Global Corporate Finance, Vlerick Business School analysed almost 40,000 takeover deals that were concluded in 2021 and compared them with data from 2020 and 2019.
Cross-border acquisitions within the niche market of medium-sized companies account for almost 5,000 deals annually, representing 12% of the total number of acquisitions worldwide. The average deal value rose in 2021 by almost 15% compared to 2020, to almost €50 million.
“Since more than 1 in 10 cross-border mergers and acquisitions take place in the mid-market segment, this is an important niche with its own dynamics. With this research we are gaining new insights into the plans and evolutions of our medium-sized companies on the international acquisitions market, as it accelerates after the pandemic. As a result of analysing almost 40,000 acquisition deals, we can see that this mid-market segment remains an interesting, healthy and growing niche on the international acquisitions market and therefore deserves more attention and specialisation,” says Kerstin Fehre, Professor of Strategy at Vlerick Business School.
Worldwide, cross-border acquisitions in the mid-market segment are dominated by North American buyers, followed by European players. Together, they account for 80% of the acquisitions in terms of both value and volume. The acquired European companies represent 40% of the deals, in terms of transaction value and volume alike. These are mainly medium-sized companies from the UK, Germany, France, the Netherlands and Sweden, with tech companies – accounting for 42% of the acquisitions – being the most popular. Worldwide, the highest average acquisition value of €52.7 million was achieved in the healthcare industry in 2021.
“The research shows that North America is a net buyer, with a global focus on IT companies, while Europe is a net seller. Furthermore, we note that European companies mainly realise acquisitions within Europe: 76% of transactions with a European buyer are intra-European and less than 25% involve other continents. Worldwide, European targets represent 67% of the number of transactions. We note that even European medium-sized companies that are starting an acquisition process need both intra-European and multinational advice tailored to their company,” says Philippe Craninx, Managing Partner at Moore Belgium and head of M&A practice for Moore Global.
Compared to the global share of 12% of the acquisitions in the mid-market segment, this niche is an outperformer in Belgium with no less than 30% of the number of transactions. Belgium is also a net seller and is therefore in line with the European trend.
Following the international trend, IT and Healthcare are the most important sectors, but – how could it be otherwise? – the relative strength of Food & Beverage also stands out as a target market. It is also striking that Belgian buyers mainly look to the neighbouring countries, France and the Netherlands, whereas the United States is the main buyer.
The success of acquisitions in the mid-market segment depends to a large extent on a good understanding between the local, often family, entrepreneur and the multinational player that wishes to take over the company. It is important for both parties to understand each other well and therefore to speak the same language. This often proves a significant obstacle. Both tend to use their own jargon and apply a different conceptual framework. In addition, they will usually have a different hierarchical structure and the director of a medium-sized company tends to have a strong emotional connection with their company. When it comes to complexity and risks, acquisitions in the mid-market segment are comparable to the larger international transactions, both in terms of the legal, tax and regulatory framework and with regard to reconciling different, strong corporate cultures and local markets.
“We therefore regard corporate finance as an interaction between internal and external environmental factors that determine the success of mergers and acquisitions. By means of our 360° approach, which is both process-driven and supportive, we respond to the risk management, the rules imposed on companies and investors, the sustainable long-term effects of an acquisition and the creation of shareholder value. The combination of this 360° approach with a specialisation in the mid-market segment proves decisive for the success of acquisitions in this not insignificant niche,” concludes Philippe Craninx.
Moore Belgium is the largest independent accounting and consulting service provider in Belgium with key centres in Antwerp, Brussels, Ghent and Hasselt and 24 local branches throughout Flanders. The company expects to achieve a turnover of €120 million in 2022 with around 1,000 employees. As a companion on the journey, Moore Belgium supports the growth trajectory of SMEs and medium-sized companies with services in the areas of Accountancy, Audit, Business Analytics, Business Consulting, Corporate Finance, Interim Management and Tax & Legal Services.
As a member of Moore Global – one of the largest accountancy and consulting networks in the world – Moore Belgium also helps its clients in over 100 countries. Moore Global Corporate Finance (GCF) serves medium-sized and fast-growing companies with a cross-border team of corporate finance experts and offers the full range of corporate financial services, from advice on M&A transactions and attracting external capital to transaction services (due diligence & integration) and valuations.