Europe’s rebound in PE dealmaking is expected to continue in 2025 with a strong focus on innovation-driven sectors such as tech and healthcare.
Last year, PE deal value in the region grew nearly 24% to €543.4 billion (about $566.2 billion) compared with 2023, according to PitchBook data, while the deal count over that time period held steady around 7,000.
Declining interest rates and narrower credit spreads reduced buyout financing costs, helping bridge the valuation gap between buyers and sellers.
We spoke to industry experts for their insights and predictions, revealing trends and strategies expected to define deal activity in Europe this year.
More focus expected on tech-driven sectors
Several sectors are poised to dominate PE dealmaking in 2025, driven by innovation and shifting global priorities.
Ian Keefe and George Weavil, partners in law firm Goodwin’s UK PE practice, expect tech, healthcare, life sciences and business services to remain in focus. Businesses at the intersection of these sectors, such as healthcare tech or tech-enabled services, will likely be in high demand, they said.
Digital infrastructure will also command attention, according to Andrew Wingfield, partner at law firm Proskauer Rose.
“The rapid expansion of AI, cloud computing and 5G connectivity continues to fuel demand for data centers, with private equity firms having already committed over $100 billion in the past three years,” he said.
While appetite for tech-focused companies will grow, traditional industries such as energy and defense will still attract investment.
According to Wingfield, Donald Trump’s return as US president signals renewed support for fossil fuel deregulation. This will create opportunities in traditional energy sectors while Europe and Asia will maintain commitments to renewable energy investments.
Market uncertainty to put pressure on valuations
Macroeconomic headwinds will continue to impact valuations throughout 2025.
“Valuations in private equity are expected to remain under pressure throughout 2025 due to macroeconomic volatility, interest rate uncertainty, and global policy shifts,” said Wingfield.
AXA IM Prime’s head of private equity, Peter Ischebeck, predicts a gradual stabilization: “Disconnects between holding and exit valuations are starting to diminish. A positive valuation trend in 2025 is likely, driven by robust, healthy EBITDA growth of portfolio companies.”
However, certain sectors, like digital infrastructure and healthcare, will continue to command premium valuations, according to Keefe and Weavil.
The challenge, according to Asante Capital managing partner Warren Hibbert, will be identifying high-quality businesses with sustainable growth while avoiding overinflated valuations as increased competition for the best assets drives up price tags.
Earnouts, contingent pricing and CVs
PE firms are adopting more flexible deal structures in response to valuation pressures and market uncertainties.
Wingfield highlighted the rise of earn-outs and contingent pricing mechanisms: “These help bridge valuation gaps by tying parts of the purchase price to performance milestones.”
He also noted the growing use of continuation vehicles, particularly in tech and infrastructure investments: “CVs have become attractive where long-term growth potential remains strong, but market conditions are less favorable for full exits.”
Minority investments are also becoming more popular. Ischebeck explained, “There’s increased activity in minority equity recapitalizations, which inject liquidity and capital into companies while waiting for favorable IPO and M&A market conditions.”
ESG will still have a role to play
ESG considerations will remain central to Europe’s PE strategy in 2025.
Rachel Lowe, special regulatory counsel at Proskauer, emphasized the impact of new compliance frameworks, explaining that with the EU’s Corporate Sustainability Reporting Directive and global standards from the International Sustainability Standards Board, new disclosure obligations are set to reshape the market.
“To succeed in 2025, private equity firms must craft clear, robust ESG strategies that integrate house-level policies, fund-level goals, and asset-specific practices, ensuring they meet investor expectations, too,” Lowe added.
Ischebeck shared a similar view, arguing that ESG considerations represent additional PE value-creation levers for GPs.
However, Hibbert pointed out that “some US LPs won’t invest in GPs that prioritize ESG as a key strategy element.” Despite this divide, ESG maturity and scrutiny will likely continue to influence dealmaking.
Featured image by Chris Griffiths/Getty Images
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