M&A Activity and the Valuation Wedge in Europe: Evidence from Transaction and Public-Market Multiples

Sammanfattning

We introduce the valuation wedge, the log difference between an acquisition’s EV/EBITDA multiple and a contemporaneous industry- and country-matched public benchmark, to separate pricing in the market for corporate control from broad market valuations. Using completed acquisitions across 32 European countries from 2005 to 2025, we test how the wedge moves with merger activity and macroeconomic conditions. The wedge narrows as merger wave intensity rises, contradicting the behavioral prediction that deal prices exceed public benchmarks in elevated M&A markets. A one percentage point increase in the target-country policy rate widens the wedge by 2.6 to 2.8 percent, while stronger GDP growth narrows it. Decomposition shows the wedge moves mainly because public benchmarks reprice faster than negotiated deal prices, not because acquisition prices themselves swing. Macroeconomic conditions shape acquisition pricing more robustly than wave dynamics.