Adevinta/Permira: low valuations in European classifieds catch private equity’s eye

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Second-hand goods have value for the right buyer. Private equity firms have spied bargains of late among Europe’s flagging technology stocks. The latest is Adevinta, which owns classified sites in Europe such as Leboncoin in France.

On Friday, the Oslo-based business confirmed a non-binding approach from Permira and Blackstone. Its shares rose by more than a fifth, valuing the group at €13bn ($14bn) including debts.

Public markets have lost interest in European classified advertising. Shares in Adevinta and Schibsted, the Scandinavian parent that spun it off in 2019, had fallen by more than half since a 2021 peak prior to Friday. Slowing growth, sizeable debts and large investment loads all turned buyers off. Adevinta’s dominant market position and plans to capture more of the value chain are the small print meriting a second look.

After the shift online, the classifieds model has remained relatively unchanged for the past two decades. Sellers post items for buyers to find. Payments and delivery are then arranged by third parties once the sale is agreed. European classifieds are now pushing for a slice of these and are adding in helpful escrow protection. The move is an attempt to counter the threat of incursion from rivals like Meta’s Facebook Marketplace. 

Adevinta is spending heavily to evolve, with about 20 per cent of annual revenues going back into products and new technology. Its transactional revenues rose by 52 per cent in the second quarter of the year, albeit from a low base.  

Earnings will follow. A compound annual growth rate of 35 per cent per share is expected in the next three years, thinks Jefferies. A price/earnings to growth ratio of around one equates to good value at the current price.

Permira already has a 12 per cent stake, while large shareholders eBay and Schibsted are reportedly well disposed towards the deal. Minority investors should expect this to be a buyers’ market.