Lender concerns over volatility are lowering average multiples for leveraged buyouts (LBOs) in Europe this year, although deal volumes continue to grow.

“There is often a fundamental mismatch between sellers and buyers when it comes to LBOs,” according to one London-based lawyer.

On the sellside, sponsors are often under pressure from their limited partners (LPs) to show returns, while lenders often struggle to meet leverage expectations on the buyside, the lawyer added.

As a result of these market dynamics, the average enterprise value (EV)/EBITDA multiple in European LBOs is just 11.22x in the year to date (YTD) over 106 deals that disclosed this metric, according to Mergermarket data.

This is a sharp decline from 18.82x over 201 deals in 2024. Average multiples for LBOs had ranged between 11.47x (2023) and 14.59x (2022) in the previous four years.

The largest European LBO of the year so far is a consortium deal by EQT and First Kraft for the Swedish accounting software company Fortnox. The offer values its equity at SEK 54.9bn (EUR 5.07bn).

Volumes are building

There have been 378 LBOs in Europe, worth a combined EUR 53.6bn, in the YTD, according to Mergermarket data. This compares to 461 LBOs worth EUR 49.5bn in YTD24 and 416 LBOs worth EUR 22.1bn in YTD23.

“The increased buyout activity in Europe of 2024 has carried through to 2025,” according to Adrian Maguire, London-based partner with Kirkland & Ellis. “Sponsors are focusing on sectors less exposed to macroeconomic sensitivities, such as healthcare and financial services.”

Since the declaration of the pandemic in March 2020, Europe has seen the rollout of vaccines, the Russian invasion of Ukraine, sanctions cutting off Russian gas, an inflation shock, rising interest rates, falling interest rates, and the opening shots of a global trade war.

Macro-economic uncertainty always translates into higher pricing for LBO debt, the lawyer said, adding that this is particularly true when it comes to private credit and the high-yield market.

The largest European LBO since 1 January 2020 came in April 2022, just after Russia invaded Ukraine. This was Blackstone’s takeover of the Italian airports-and-highways group Atlantia alongside Edizione. The take-private deal valued its equity at EUR 12.7bn.

Source: Mergermarket, data correct as at 23-May-25

Secondary, tertiary deals in spotlight

“We tend to see more secondary and tertiary buyouts than debut deals,” the lawyer said. This is because buyers and lenders have more confidence in the cashflows of sponsor-backed names than they do in assets that have been carved out from corporates, he added.

“Secondary and tertiary buyouts are often seen as safer bets, although value creation can be harder,” the lawyer said. Even so, due diligence often focuses on EBITDA adjustments and cashflow projections, he said.

Despite the difficulties in getting deals over the line, Mergermarket intelligence reveals plenty of opportunities coming to market.

For example, H.I.G. Europe is in exclusivity to acquire Austria-based SGS Industrial Services; Hanseatic Broking Center (HBC), a German insurance broking platform, is being prepared for sale by owner Preservation Capital; and Portobello is in talks with three potential bidders about its portfolio company Elmubas Petfoodgroup, a pet food producer.

If pricing continues to be weak, the use of continuation funds to derisk processes for the sellside is likely to remain a major theme for this year’s activity.