Europe’s private equity market is well on its way to recovery as renewed US investor participation and increased AI dealmaking boosted deal activity in 2024.
Improved dealmaking came despite regional and global headwinds, according to PitchBook’s 2024 Annual European PE Breakdown. In a year of elections, France, Germany and the UK were subject to political upheaval, while the war in Ukraine showed little sign of abating. At the same time, interest rates remained elevated.
Annual PE deal value increased 24% year-over-year to €547 billion (around $570 billion), marking the third-best year of dealmaking ever after 2021 and 2022. The total deal count remained flat at around 7,000 transactions.
The return of leveraged buyouts, which are typically larger and more complex to execute, was also a sign of confidence returning to the market. The median deal size in 2024 increased by 50% to a record €30 million.
Going into 2025, there have been a few reasons for investors’ optimism. Among them are hopes that recently re-elected US President Donald Trump could help restore stability to Europe, and energy prices, by bringing about a resolution to the Ukraine war. And further interest rate cuts globally could further spur PE dealmaking.
The UK government’s introduction of PISCES, a new exchange to trade shares in private companies, would also open the asset class to more retail and private wealth investors. However, the Labour government will also increase carried interest tax from 28% to 32% starting in April, which could have a negative impact.
Another driver of growth for dealmaking is the return of US investors. Deal value with US participation rose 51.9% YoY—almost 1 in 5 deals involved US investors—and they also took part in seven out of the top 10 deals in 2024.
The increase could be put down to US investors’ desire to diversify away from their home turf as the wider economic indicators improve in the US. This is being done either through funds based in the US or indirectly through subsidiaries located outside of the country.
Some European assets represent good value for US sponsors, benefiting from a weaker euro, especially in the run-up of the US presidential election in Q4. The median European PE buyout valuation in terms of EV/EBITDA multiple was also half a point lower than the US figure in 2024.
As dealmaking has grown, AI and machine learning is now taking center stage as a vertical. Deal value doubled from 2023 to €11.2 billion, reaching an all-time high.
Deal count also broke the record with 127 transactions last year.
Among deals last year were Thoma Bravo‘s $5.3 billion take private of Darktrace in October. FTV Capital acquired UK-based Windward, an AI maritime intelligence company, through a £216 million (around $266 million) leveraged buyout in December.
As deal activity starts picking up, there is hope that the exit backlog could be reduced in 2025. Overall, there were 1,308 exits last year totalling €251.9 billion.
The report estimates that exit count will recover to 2021 levels given the strong end to the year. However, this optimism comes with the caveat that the investment/exit ratio remains elevated at 2.4x.
Over half of the exits in 2024 involved sponsor acquisitions, compared with the 10-year average of 40.7%, reversing the traditional sponsor/corporate split.
Corporates are often more willing to pay higher premiums as they tend to hold assets much longer. However, sponsor acquisitions caught up last year as macroeconomic indicators and financing terms improved.
Sponsors were also keen to look for exits for their extended portfolio positions. The median holding time for GPs increased from 5.2 years to 6.1 years in 2024.
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