European private equity had a better 2023 than many were expecting given that it was a year characterized by rate increases, geopolitical tensions and economic instability.
Here are four trends from PitchBook’s 2023 Annual European PE Breakdown that drove deals, fundraising and exit activity.
PE deal value may have fallen by 26.5% last year but estimated deal count rose by 4.4% year-over-year. As the cost of debt increased significantly last year, large deals became much less attractive. Mega-deals (those worth €1 billion or more) were at their lowest level by aggregate deal value since 2014.
However, PE funds have amassed significant sums of dry power in recent years and have been under pressure to deploy. This has led to a wave of add-on activity as firms have sought to generate growth through buy-and-build strategies and inorganic growth. Add-on transactions accounted for 54.7% of European PE deal count last year—the largest share during the last decade.
Financial services was the only sector that saw deal value grow, up 22.6% compared to 2022. Industry consolidation was a major theme throughout last year, particularly in areas such as asset management and insurance brokerage.
PitchBook analysts expect this trend to continue throughout 2024 as firms seek to increase their assets under management while also under pressure to reduce fees.
PE funds in Europe raised €117.8 billion in fresh capital last year, a near record. The total is expected to increase as fundraising data for last year is finalized.
Interestingly, that total was spread across just 117 funds, the lowest annual fund count for the region in more than a decade. This was a year when mega-funds dominated—54% of all capital raised in the region went to the five biggest funds.
Cash-strapped LPs have been favoring larger, and more established, managers. Fundraising concentration among mega-funds is expected to become even greater in 2024 as market conditions are not expected to change considerably.
PE exit value across Europe stayed almost flat last year when compared to 2022. However, in the UK and Ireland exit value increased by nearly 60% to €100.1 billion—accounting for more than a third of exit value in the region. In contrast, the Nordic region saw a 55% fall in annual exit value.
The UK remains the most active market in Europe for dealmaking. Half of the 10 largest PE exits in Europe in 2023 were UK-based companies.
Featured image by Barton/Getty Images
