European PE Breakdown
Europe's Q1 PE dealmaking outlined in 6 charts
April 24, 2023
European private equity remained strong in Q1 2023, with add-ons dominating, despite a drop in deal value from the previous quarter. The tough fundraising landscape was punctuated by a handful of closes for large funds.
Below are six charts that highlight trends identified in our Q1 2023 European Private Equity Breakdown.
With an estimated €182.8 billion (about $201.9 billion) invested across 1,932 transactions, both deal value and count were down from Q4 2022 by 8.7% and 3.8%, respectively.
However, deal count was up year-over-year—exceeding the 1,821 deals recorded at the same point in 2022—even as total deal value was down, from €196.2 billion, as investors shied from large-cap deals.
PE firms are increasingly pursuing buy-and-build strategies by acquisitions to bolster their existing portfolio companies. This type of deal accounted for 59.8% of all Q1 deal volume—the biggest share of overall deals in a decade. Conversely, growth equity deals accounted for just 17.2% of deal count as already-high valuations, and more expensive debt, cause managers to turn away from multiple expansion strategies.
The €26.3 billion in capital raised represented a "signal for confidence to private markets," according to the report. The close of a mega-fund during the period did much to move the needle: Permira's eighth flagship fund, which closed March 8 on €16.7 billion.
While it was by far the largest fund close of the quarter, a number of new vehicles targeting between €1 billion and €5 billion also closed. These included Waterland's ninth namesake fund, which raised €3.5 billion in January; Oakley Capital's fifth fund, which raised €2.85 billion in February; and Boston-based Summit Partners' €1.4 billion close of its Europe growth equity fund, also in February.
Exit value was down 12.1% YoY to an estimated €70.6 billion, compared to €80.3 billion in Q1 2022. But on a quarter-over-quarter basis, the figure remained unchanged from Q4 2022 despite fewer deals. This level of activity is akin to that seen in the second half of 2019, which had an entirely different macroeconomic environment.
Moreover, strategic buyers have dominated the exit landscape as companies seek to find bargains amid falling valuations to strengthen their respective balance sheets.
The B2B sector significantly increased its share of European PE exit value, more than doubling Q4 2022's €14.6 billion to €29.5 billion—even exceeding its 10-year average. This is due in part to a number of sizable B2B liquidity events. Of the 10 largest exits for Q1, seven were in the B2B sector, including the €1.4 billion secondary buyout of French automotive software company A2Mac1 by Providence Equity Partners.
While there are green shoots of optimism for European private equity in the first quarter, there is still a distinct lack of enthusiasm for firms looking to exit via a public listing due to market volatility. There were only three in Q1: the IPOs of EuroGroup in Italy and Hotter Shoes in the UK and a SPAC deal for Lotus Cars EV unit Lotus Technology, also in the UK. In Q1 2022, there were six public listings.
Firms appear to prefer keeping their companies private longer, and enjoying a level of insulation from the issues facing those on the various indexes across Europe.
Featured image of St. Paul's Cathedral in London by pcruciatti/Shutterstock
Below are six charts that highlight trends identified in our Q1 2023 European Private Equity Breakdown.
With an estimated €182.8 billion (about $201.9 billion) invested across 1,932 transactions, both deal value and count were down from Q4 2022 by 8.7% and 3.8%, respectively.
However, deal count was up year-over-year—exceeding the 1,821 deals recorded at the same point in 2022—even as total deal value was down, from €196.2 billion, as investors shied from large-cap deals.
PE firms are increasingly pursuing buy-and-build strategies by acquisitions to bolster their existing portfolio companies. This type of deal accounted for 59.8% of all Q1 deal volume—the biggest share of overall deals in a decade. Conversely, growth equity deals accounted for just 17.2% of deal count as already-high valuations, and more expensive debt, cause managers to turn away from multiple expansion strategies.
The €26.3 billion in capital raised represented a "signal for confidence to private markets," according to the report. The close of a mega-fund during the period did much to move the needle: Permira's eighth flagship fund, which closed March 8 on €16.7 billion.
While it was by far the largest fund close of the quarter, a number of new vehicles targeting between €1 billion and €5 billion also closed. These included Waterland's ninth namesake fund, which raised €3.5 billion in January; Oakley Capital's fifth fund, which raised €2.85 billion in February; and Boston-based Summit Partners' €1.4 billion close of its Europe growth equity fund, also in February.
Exit value was down 12.1% YoY to an estimated €70.6 billion, compared to €80.3 billion in Q1 2022. But on a quarter-over-quarter basis, the figure remained unchanged from Q4 2022 despite fewer deals. This level of activity is akin to that seen in the second half of 2019, which had an entirely different macroeconomic environment.
Moreover, strategic buyers have dominated the exit landscape as companies seek to find bargains amid falling valuations to strengthen their respective balance sheets.
The B2B sector significantly increased its share of European PE exit value, more than doubling Q4 2022's €14.6 billion to €29.5 billion—even exceeding its 10-year average. This is due in part to a number of sizable B2B liquidity events. Of the 10 largest exits for Q1, seven were in the B2B sector, including the €1.4 billion secondary buyout of French automotive software company A2Mac1 by Providence Equity Partners.
While there are green shoots of optimism for European private equity in the first quarter, there is still a distinct lack of enthusiasm for firms looking to exit via a public listing due to market volatility. There were only three in Q1: the IPOs of EuroGroup in Italy and Hotter Shoes in the UK and a SPAC deal for Lotus Cars EV unit Lotus Technology, also in the UK. In Q1 2022, there were six public listings.
Firms appear to prefer keeping their companies private longer, and enjoying a level of insulation from the issues facing those on the various indexes across Europe.
Read more: Q1 2023 European Private Equity Breakdown
Featured image of St. Paul's Cathedral in London by pcruciatti/Shutterstock
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