In the last 20 years M&A advisors created EUR 3.2 bn additional value to the sellers

An empirical study done on the sample of 104 M&A transactions in Slovenia in the span of 20 years, between 2000 and 2019, showed that M&A transactions in which sell-side financial advisors have retained, resulted in the aggregated enterprise value of EUR 8.1 bn, while the transactions without their engagement saw an aggregated value of EUR 4.9 bn. Thus, in Slovenia in the 20 years period, financial advisors’ added value to the sellers of equity stakes stood at EUR 3.2 bn.

When observing the valuation multiples, the involvement of financial advisor on the sell-side meant that on median the relative company valuations including the profitability measures (EBIT, EBITDA) stood higher than in cases when owners did the transaction without involving the advisor:

  • 15.7x EV / EBIT compared to 9.4x EV / EBIT without financial advisor
  • 9.1x EV / EBITDA compared to 7.1x EV / EBITDA without financial advisor
  • and slightly lower 0.9x EV / Revenue compared to 1.0x EV / Revenue without financial advisor (largely due to non-profitable / distressed nature of businesses)

Financial advisors’s engagement premium resulted in 66% higher EV / EBIT

  • 66% higher EV / EBIT achieved (or 6.3x higher notch)
  • 28% higher EV / EBITDA achieved (or 2.0x higher notch)
  • and 10% reduction of EV / Revenue (or -0.1 lower notch), as outlined largely due to non-profitable / distressed nature of businesses)

An empirical study further observed the characteristics of M&A transactions in an emerging economy that has transitioned from a central-planning economy to a market economy, while having also been subject to international economic cycles, including periods of expansion, recession, and economic recovery.

The analysis showed that companies have been sold at higher valuation multiples in case:

  • the company was highly indebted (compared to low indebtedness)
  • the transaction happened in the period of economic expansion (compared to the recovery period)
  • the company was highly profitable (compared to low)

While the relative valuation multiples can prove helpful in providing a rule of thumb valuation analysis of a company, cross-checking the obtained valuation through other fundamental analyses is strongly advised as each company is unique and valuations are affected by various factors (also in addition to profitability, time period, indebtedness and the business sector which the study had taken into account).

We are happy to provide you with more information about valuations and the added-value our financial advisory services might unlock for you!