We recently attended ACG’s International Event at the Hungarian Consulate. Here are five of our top takeaways from the event, which focused on add-ons and investments in Europe.
Prepared by TresVista Financial Services
5 Things You Missed Last Week -
Add-on Investments in Europe: Mr. Szigethy believes that the add-ons concept has changed over the past ten years and the number of add-ons has grown more than the platform companies, which for Riverside is an average of two add-ons per platform. He further states that “Doing multiple add-ons is the single most reliable way to get the purchase multiple down to a reasonable level.” Mr. Rosener mentioned that the purchase multiples in the U.S. were around 11.3x EBITDA, and as per Mr. Szigethy, multiples in Northern Europe for healthy growth businesses are similar. Typically, European industries that are profitable for middle-market PE firms include manufacturing, distribution, software, tech-enabled services, healthcare and education & training.
Central Europe, an Attractive Target Market: Mr. Szigethy believes that Central Europe offers exciting investment opportunities. The strengths of this region include the benefits of emerging markets coupled with growing GDPs, catching up with neighboring wealthier regions over time. In addition to this, Central Europe offers a highly educated and talented workforce, especially in the software industry. The quality of management in Central Europe has significantly improved over the last 25 years, which is a prerequisite for a healthy growing business.
Approaches Towards Deals and Outsourcing: Globally Riverside has a team of 18 people who bring in over 4,000 deals a year, which includes over 1,000 deals based in Europe. About 20% of these deals are then analyzed and scrutinized. Out of these, they visit around 7%-10% of the transactions and invest in about 1.0%- 1.5% of the deals in a year. Riverside employs or retains a workforce of about 250 employees to handle the process of vetting the deals and growing the portfolio. Also, Mr. Szigethy mentions that they have started outsourcing some of their analytics and research work to TresVista, who attended the conference.