For over ten years, SORGEM Evaluation has been analysing public offers relating to the French market using data published on the AMF’s website. We have chosen to play an active role in disseminating the economic and financial analyses carried out in connection with public offers, and we regularly publish selected analyses drawn from our review of independent expert reports.
This note sets out, amongst other things, trends in the number and type of public takeover bids, the valuation methods and parameters used by independent experts and the lead underwriters, and highlights some recent articles on the subject.
As a reminder, in the case of public offers likely to give rise to conflicts of interest within the board of directors, the supervisory board or the competent body of the target company, as well as in the case of mandatory delistings, an independent expert is appointed by the management bodies of the company whose securities are the subject of the offer. Their role is to issue an opinion on the fairness of the financial terms offered by the offeror to the shareholders of the target company. The expert issues a detailed report in which they analyse the value of the company, the valuation work carried out by the presenting institution and any related agreements (transactions prior to or following the offer, management packages, service contracts, liquidity guarantees, financing of the offer, etc.).
Number of equity certificates recorded by the AMF in connection with public offers and the average fees charged by independent experts
The year 2024, particularly the second half of the year, was characterised by sustained activity in terms of fairness opinions produced in connection with public offers. With 39 certificates recorded, 2024 exceeded the annual average for the last ten years (an average of 33 certificates), marking a sharp rebound following the low recorded in 2023.
In 2024, half of the offers were initiated by industrial companies (as opposed to family or financial investors).
The offers mainly targeted small and medium-sized companies (known as ‘small’ and ‘mid-cap’ firms). The median equity capital of the companies, estimated at the offer price, stands at €60 million, ranging from €1.0 million to €2.5 billion.
This may partly explain the observed decline in the expert’s remuneration, which stood at around €105,000 on average in 2024.
Types of Public Offerings Encountered and the Target’s Sector
In terms of sector, the companies that have attracted the most public offers over the last two years are industrial firms, as well as those active in the consultancy and software sectors.
Following a decline in the first half of 2024 in the initiator’s intention to implement a compulsory withdrawal, it is evident that such transactions remain a key objective for initiators.
Premiums offered to shareholders
Premiums relative to the average share price over the three months preceding the offer have been rising in recent years.
In 2024, the average premium observed relative to the share price (3-month average) stood at 43 per cent, compared with an average premium of 25 per cent relative to the DCF valuation.
It is also worth noting that, on average, the smaller the share of the capital held by an offeror prior to the offer, the higher the premium offered relative to the share price tends to be.
It should be emphasised, however, that the premiums offered mask significant disparities between the various offers.
Methods favoured by independent experts and arranging banks
The method favoured by experts and banks remains discounted cash flow analysis, which is the primary method chosen in more than 8 out of 10 cases.
Whilst the use of the market comparables method was historically significant, we have observed a decline in its use over recent years. Experts use this method less frequently than bankers, but tend to use it more for information purposes only – that is, without relying on it to establish a valuation range (shown in pale colours in the accompanying charts).
The method based on observed transactions involving private companies remains less widely used than in the past, particularly amongst experts. This may be due to a lack of relevant benchmarks (a decline in the number of transactions carried out in an economic and financial context comparable to that prevailing at the time of the transaction). The method continues to be used to a significant extent for indicative purposes.
A closer look at the multiples considered by independent experts and underwriting banks
When the market comparables method is applied, experts and investment banks tend to favour EBITDA and EBIT aggregates.
The market multiples used by experts and banks have varied over recent years.
In 2024, there was an increase – more pronounced amongst experts than amongst banks – in the use of the EBIT multiple. This trend could be explained by the higher capital intensity of companies that were the subject of public offers.
It is also noted that neither experts nor banks used the P/E ratio during 2024. This may be explained by the absence of financial services companies amongst the targets, a sector in which this multiple is usually applied.
Benchmarks used by independent experts and the underwriting banks
In the case of public offers for listed companies, it is not surprising to find the share price cited as the primary benchmark by the experts and the banks.
Share capital transactions are regularly used where such transactions took place close to the date of the offer announcement and/or where they involve a block purchase leading to the public offer.
Price targets are, by definition, only available where the target company is covered by analysts. As such, the use of this benchmark varies and depends on the extent to which the company is covered. It is worth noting that this benchmark has been used more as a guide by both experts and banks over the last two years.
Components of the discount rate and long-term growth
Over the last five years, the median discount rates applied by experts and banks averaged around 10 per cent, before rising in 2024 to an average of 12 per cent. As far as valuers are concerned, this rise appears to be mainly linked to the use of higher specific premiums in the discount rate, which would be consistent with the smaller average size of the companies that were the subject of public offers in 2024.
A closer look at the parameters selected by the experts
The discount rate used by the experts is almost exclusively estimated using the CAPM formula.
The equity market risk premium used in this context has historically fallen within a range of between 7.1% and 5.7%. The average reached a 10-year low of 5.74% in the second half of 2024.
However, this fall does not necessarily imply a general reduction in cash flow discount rates, as we note a sharp rise in the risk-free rate over the same period.
The risk-free rate has, in fact, followed the trend in sovereign bond yields. After a slight fall in the first half of 2024, the risk-free rate rose again during the second half of the year.
A selection of articles on the subject
- Les Echos, “Shareholders in Bolloré’s holding companies left wanting more” -> Link to article
- L’AGEFI, “The valuation of Neoen’s convertible bonds, as part of Brookfield’s takeover bid, is causing controversy” -> Article link
- Controversy over the expert’s report on the delisting of property company MAB. LinkedIn post by Pascal Quiry -> Link to LinkedIn post
- Video by Gilles Chauffaud, “Small Cap ANALYSIS – Takeover bid for Esker” -> YouTube video link
- Interview with Thomas Hachette by Bruno de Roulhac, financial journalist at L’Agefi, on takeover bids and fairness opinions. Thomas Hachette’s LinkedIn post -> Link to LinkedIn post
Disclaimer & contacts
This report has been prepared for information purposes only, based on SORGEM Evaluation’s databases compiled from publicly available information on the AMF website.
The authors and SORGEM Evaluation accept no liability whatsoever for the transcription, analysis or interpretation of the information contained in this note.
Contacts for this study:
- Thomas HACHETTE, Partner, SORGEM Evaluation;
- Etienne LANGER, Manager, SORGEM Evaluation;
- Mathilde FERRERO, Consultant, SORGEM Evaluation.
