After a record-breaking 2024, Europe’s PE market entered 2025 with a noticeable change in tone.
The first quarter of the year was marked by global macroeconomic uncertainty, geopolitical tensions and a stark recalibration of investor confidence.
PitchBook’s Q1 2025 European PE Breakdown revealed a market in flux—defined not just by caution but also by adaptation, resilience and pockets of optimism. Here are four of the most significant developments that shaped the European PE landscape in the first quarter of the year.
Perhaps the most defining feature of Q1 was the clear decline in PE deal activity. Total deal value dropped by 24.6% quarter-over-quarter, while deal count fell 17.7%.
The downturn is largely attributed to rising geopolitical tensions—most notably between the EU and the US—as well as domestic political instability in France and Germany.
US-imposed trade tariffs, including a 25% tax on imported vehicles and steep levies on goods from Switzerland, Norway and the UK, have introduced further complexity for European portfolio companies.
While the 90-day pause on most tariffs might have a positive impact on investor confidence, if they are reinstated, then sectors such as manufacturing, consumer goods and retail are expected to come under increased pressure. However, in contrast, software and healthcare businesses remain relatively insulated.
Investors responded cautiously, shifting away from high-risk, high-value deals toward smaller, strategic transactions. Add-on deals—a staple of the buy-and-build model—rose sharply, comprising 39% of deal value, up from 31% at the end of 2024.
This suggests a more defensive posture, with GPs reinforcing existing platforms instead of pursuing transformational buyouts.
Just as new investments slowed, exit activity also lagged. Exit value fell by 18% QoQ, and exit count dropped 25.2%, continuing a trend of sponsors holding onto assets longer.
The median holding period for European PE-backed companies ticked up to 3.4 years—its highest point in the last decade.
Deals significantly outpaced exits, pushing the investment-to-exit ratio to 2.6x, up from 2.3x in 2024.
With IPO windows largely closed and public market valuations volatile, sponsors appear to be delaying exits, opting to wait for more favorable conditions. Those who did exit in Q1 faced lower valuation multiples than in previous quarters.
This backlog could place pressure on returns and liquidity in the months ahead. Notably, the slowdown in exits isn’t necessarily a red flag, but it does highlight the industry’s sensitivity to market timing and macroeconomic headwinds.
The Nordics, benefiting from strong monetary independence and more stable political environments, contributed three of the top 10 exits this quarter. Exit value in the region hit €10.6 billion—already half of the total for all of 2024. The DACH region also stood out, with €12 billion in exit value, driven in large part by Cinven’s exits from Viridium Gruppe and Apleona.
These regional dynamics underscore the importance of local macro conditions and independent policy tools—factors that can shield dealmaking from broader EU-level volatility.
European PE firms raised €23.7 billion across 22 funds in Q1 2025.
More than 40% of that total was directed toward middle-market vehicles, suggesting a healthy appetite for funds targeting the core of the market.
This marks a positive reversal after several years of declining mid-market fundraising. Follow-on funds from major names like CVC Capital Partners, Oakley Capital and Adelis Equity contributed heavily to this upswing. Additionally, US software-focused investor Thoma Bravo launched its first Europe-dedicated fund, closing on €1.8 billion.
The rise in fundraising activity—especially outside of the mega-fund category—signals long-term confidence in the European PE space, even if deal execution remains uneven.
Featured image by fotograzia/Getty Images
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