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Small Caps: are M&A transactions approaching stabilisation?

small Caps

The M&A market for SMEs has also experienced a significant decline in recent months. However, data for the second half of the year indicate that transaction volumes will pick up again in 2024. Here are some insights and analysis from the experts at AURIS Finance, a mergers and acquisitions consultancy.

According to the results of the Epsilon Research Barometer for In Extenso Finance, the number of mergers and acquisitions for SMEs fell by 11% year-on-year to 963 deals in 2023 (compared with 1,080 deals in 2022 and 1,172 deals in 2021, according to previous editions of the Barometer). The sharp downturn recorded in the first half of the year (a 35% fall in the number of transactions over one year) was offset in the second half by an upturn in transactions, with deals up 20% on the previous six months.

Paris-Lyon axis

This two-phase trend highlights the significant impact of external economic conditions on the M&A market for SMEs. The decline recorded in 2023 is less severe than expected, reflecting a good level of market resilience. Nevertheless, the recovery has not been evenly spread: there have been regional and sectoral variations. The Paris-Lyon axis remains in the lead again this year, accounting for half of all transactions in France in 2023. The Île-de-France region saw a drop in the number of transactions, but nevertheless remained in first place with 343 deals.

Tech and services

Two sectors stand out: business and personal services, with 235 transactions, and TMT (media and telecommunications technologies), which alone accounted for 300 transactions in France over the year. This trend is in line with the global market: acquisitions in the Tech sector have picked up strongly since the start of 2024. As the market for software publishers is undergoing a consolidation phase, many transactions have involved IT software companies, such as B-to-B oriented SaaS (Software as a Service) software publishers. For example, in March 2023, software publishers Digiforma and Rich ID joined forces to carve out a place for themselves in the EdTech market.

Family-owned businesses

It also appears that SMEs with a value of between €5 million and €15 million were more resilient in 2023 than larger companies. Family businesses, which are less exposed to macroeconomic fluctuations, were particularly resilient. The decline in the number of transactions was felt more acutely in the higher value segment, with transactions worth between €15 million and €50 million falling by five points over the year, with no significant recovery in the second half of the year. On the buyer side, unlisted companies accounted for the majority of transactions. Investment funds were less active in 2023 than in 2022.

Our experts at your side

In 2024, the macroeconomic environment should lead to an increase in M&A transactions: stable interest rates could allow funds to become more active again.

AURIS Finance works alongside company founders and directors. Our experts specialise in different sectors and will support you throughout your acquisition or sale transaction. They will also advise you on how to structure your financing and find investors in line with your development objectives.

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