Business as usual for Europe's dealmakers

A brisk recovery in Europe's tech M&A market has followed a relatively flattened COVID-19 curve. Although a rise in activity in recent months has seen Western Europe's share of dealmaking tick upward, that hasn't necessarily translated into a healthier market. Discounts prevail in European tech M&A, while North American targets have gotten more expensive.

At the onset of the pandemic, acquisitions of tech targets based in Western Europe dropped a bit less than they did around the rest of the globe. According to 451 Research's M&A KnowledgeBase, such purchases declined by 17% in the second quarter, compared with the previous quarter. Acquisitions of North American targets, which account for almost two-thirds of global tech transactions, plummeted 23%. European activity also bounced back higher.

As we noted earlier this week, the global tech M&A market surged in August to its highest monthly level in nearly two years. In Europe, the recovery was particularly pronounced – at least in terms of deal volume. Two-thirds of the way through the third quarter, Western Europe is on pace to sell more of its tech vendors than any quarter in the past five years.

In North America, a raging bull market and an affinity for targets that seem immune, or have benefited, from the effects of coronavirus have driven the rebound in tech M&A. But in Europe, buyers are shopping for what they've always bought – companies that can be had at a discount. Since the start of April, the median Western European tech target has fetched 1.7x trailing revenue, slightly down from 2x in the past two years. North American targets, however, have fetched 4x since the spring – reversing a gradual decline from a 2018 high.