After the shocks of a pandemic, a European ground war, inflation and hawkish central banks, the macro-economic situation finally appears significantly less volatile in 2024. And this has created a space for many sponsors to revisit old exits that had fallen by the wayside during harder times.

Recent weeks have seen talk of relaunches for companies that failed to trade post-pandemic, largely due to deflated or inflated earnings. Mergermarket intelligence shows that French contract development manufacturing organisation (CDMO) Synerlab, owned by 21Invest, is back on the block; and Montagu-owned Danish property management services company DEAS is in a fresh late-stage process. DEAS has a score of 57 out of 100, according to Mergermarket‘s Likely to Exit (LTE) predictive algorithm.*

Exits in Europe, the Middle East and Africa (EMEA) logged a total of just EUR 115bn over 574 deals in 2023, according to Mergermarket data. This was below EUR 128bn over 780 deals in 2022 and the same figure over 625 deals in 2020. There have already been 50 exits in 2024 logging total volumes of EUR 2.9bn.

Exits boomed briefly in 2021 after the rollout of COVID vaccines but before the Russian invasion of Ukraine, with volumes of EUR 216bn over 923 transactions, which beat EUR 184bn over 711 deals in 2019, before the shocks began.

If at first you don’t succeed…

Press reports also suggest that Ardian is reported to be likely to relaunch French laboratory group Inovie; and Cinven has hired banks to sell British shoe retailer Kurt Geiger, which has an LTE score of 64. Like Synerlab and DEAS, these situations reheat processes that were originally launched during more uncertain times.

Some have already been successful. PAI sold in-vitro diagnostics company ELITech to Bruker [NASDAQ:BRKR] for a 3.7x return in late December for EUR 870m, three years after an exit was interrupted by an anomalous COVID-19 boost, as reported.

While most of the ongoing relaunches concern COVID-19 retirees, the same macro-normalisation is opening a window for companies that failed to trade in 2022-2023’s difficult market.

PAI has been one of the first to bite the bullet, reviving an exit for UK-based infrastructure services provider M Group, months after the sellside soft sounded lenders in late October 2022 over a potential sale. The asset has an LTE score of 56.

Try, and try again

Dealmakers are expecting even more to return as normalised interest rates, the gradual opening of syndicated financing, and lower leverage across deals is making it easier to get deals done.

The main impasse in last year’s market was a wide bid-ask spread on valuations, which is beginning to change, as reported. However, the key hurdle is yet to come, with all eyes on corporate performance in 1Q24. One failed sale process is not a great look, two is even worse.

There is a long pipeline of companies that didn’t trade around the pandemic, which could now take a cue from their peers. In 2020, Triton failed to exit German water control group Talis; Waterland didn’t find a buyer for Dutch utility supplier Nuts Group (LTE score of 29), and LDC was unsuccessful in a sale of UK-based biscuit maker Hill Biscuits (LTE score of 18).

Companies that didn’t trade through 2021 include Nordic Capital’s Alloheim, Exponent’s Evergreen Garden Care; privately-owned Munich Leukaemia Laboratory; Eurazeo’s Peters Surgical (LTE score of 27), and Fibo and Saferoad (LTE score of 24), both owned by FSN Capital.

The list for 2022/2023 pulled, delayed or gone quiet processes is even longer and includes Doxx, Busy Bees, Artemis, VetPartners (LTE score of 19) and European Dental Group. 

The mid-market is likely to be in focus to test the exit market. Sponsors must decide whether to reignite full auctions or explore alternative liquidity options to avoid a second failure.

*Mergermarket’s LTE predictive analytics assign a score to sponsor-backed companies to help track and predict when an exit could occur through M&A, an IPO, a direct listing or a deSPAC transaction.