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European Private Equity Records a Strong First Quarter, Despite Political Unknowns

May 11, 2017

Strong fundraising figures bode well for PE dealmaking in the first quarter of 2017 and beyond

SEATTLE — May 11, 2017 — Despite political uncertainty, European private equity dealmaking got off to a strong start in the first quarter of 2017, according to PitchBook’s Q1 2017 European PE Breakdown Report. The value of PE deals completed in the first quarter totaled €82.5 billion, slightly below the €89.8 billion recorded during the same quarter last year. This plateau in dealmaking comes on the heels of a post-financial-crisis high of €70 billion in new commitments raised by PE buyers last year. As financial sponsors continue to stockpile large sums of dry powder, they’ll be forced to deploy that capital, which could fuel dealmaking activity in the coming quarters. Similar to trends recorded in the U.S., European PE investors are increasingly seeking opportunities in the tech sector. In the first quarter, IT deals made up nearly 20% of completed deals in Europe, the highest proportion ever recorded by PitchBook.


“Tech investments have become a more attractive investment opportunity for private equity firms” said Dylan Cox, analyst at PitchBook. “The recurring revenue stream of a SaaS business often resembles that of more traditional PE targets. Additionally, private investment in this space has been aided by the development of an entire financial ecosystem specializing in IT, including investors, lenders, diligence firms and other service providers.”


European PE buyers forge ahead despite political unknowns

European PE deal flow started off strong in 2017. In the first quarter, €82.5 billion was invested across 554 completed transactions. This plateau represents a decline from the elevated figures recorded in 2015, but registers high on a historical basis. Steady dealmaking activity through the first quarter can be attributed to successful fundraising by PE firms in the last few years, as well as a less expensive market, making it easier for PE firms to pencil out deals.   


The IT sector continues to account for a larger proportion of the economy overall, as more goods and services can be provided through new and emerging technologies. In the first quarter, IT deals made up nearly 20% of all European PE transactions. The largest of these deals was a $3.25 billion acquisition of Polish online retailer Allegro Group by a group that included Cinven, Permira and Mid Europa Partners. Overall, PE firms invested €17.8 billion across 112 completed transactions in the IT sector in the first three months of the year.


Fundraising frenzy continues

After reaching a post-financial-crisis high last year, European fundraising is likely to remain strong in 2017. In the first quarter, €18.7 billion was raised across 30 funds. Of the funds closed during the quarter, 91% hit their targets, the highest level recorded by PitchBook. The UK and Ireland were responsible for the majority of fundraising activity, accounting for 72% of total capital raised and nearly 50% of all funds closed. Crescent Capital’s €4.2 billion mezzanine fund was the largest fund closed during the quarter. This fund raise represents the growing demand for alternative debt solutions in Europe as interest rates remain low and increasing regulatory requirements make it more difficult for middle market companies to acquire senior bank loans.



Following global trends, the volume of European exits continued to slide. The first quarter recorded 234 exits valued at €41.2 billion. While overall exit count was down, the median corporate acquisitions price of €155.4 million propped up the amount of total capital exited. Secondary buyouts accounted for 56% of exits during the first quarter, while IPOs and corporate acquisitions remained flat. Moving forward, low interest rates, low stock volatility and a growing pipeline of companies with strong cashflows and consistent growth will set the stage for an increasing number of IPOs, especially as political headwinds begin to fade.  

Download the full report here: http://reports.pitchbook.com/1q-2017-european-pe-breakdown/

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