Crystal ball

2014 could be a standout year for European private equity deals, says Mergermarket

The private equity market is recovering after a difficult four years, with a report from White & Case revealing a total of 702 private equity exits in 2013, the highest number since the peak of the market in 2007.

Exit values reached EUR65.3 billion; almost triple the value of 2009’s EUR27.3 billion. Buyout activity has bounced back too, with 912 buyouts worth EUR73.5 billion in 2013.
 
As economies in Europe have stabilised, and concerns around the Euro crisis subsided, US sponsor attitudes have changed. 2013 saw a total of 141 European buyouts with a US sponsor worth EUR18 billion, more than doubling volumes and values achieved in 2009 (65 buyouts worth EUR8.2 billion). The UK and Southern Europe have been most popular with US firms, accounting for 54 per cent of private equity deal value involving US sponsors.
 
IPO exits in Q1 2014 have increased by 350 per cent compared to Q1 2013. This follows a successful year of private equity-backed IPOs in 2013, where 24 exits on European stock exchanges raised USD11.3 billion, according to EY.
 
In terms of regions, the UK accounted for more than a quarter of European buyout volume and value (243 deals valued at EUR18.6 billion), while 30 per cent of European private equity buyouts in 2013 took place in Southern Europe.
 
By sector, industrials and chemicals businesses (accounting for 24 per cent of buyout volumes in 2013 and 18 per cent of values) and consumer companies (16 per cent of volumes and 13 per cent of values) have proved to be the most popular with private equity firms.
 
The UK and Nordics have asserted themselves as key markets for European private equity activity in 2013. The Nordics region has been one of the most stable and consistent markets for buyout firms throughout the economic downturn, with buyout volumes between 2009 and 2013 never dipping below 110. The UK accounted for 26 per cent of European buyout value in 2013, up from 23 per cent in 2011. On the exit side, the UK saw 30 per cent of total European exit value in 2013, a significant increase from 15 per cent in 2012. Stock markets in particular have provided a lucrative exit route for the UK asset class, with 10 private equity exits on the London Stock Exchange in 2013, including Blackstone’s IPO of theme park operator Merlin, which raised USD1.69 billion, and Electra Partners’ listing of insurer eSure, raising USD1.05 billion.
 
“While deal pricing and a competitive landscape still make it challenging to find good deals, there are other forces at work propelling the private equity industry,” says Sarah Syed, Mergermarket’s private equity correspondent. “Exits are on the rise, as are dividend recaps and, as our data shows, an increase in exits through the stock exchange – all of which benefit the limited partners’ coffers. Financial sponsors have enough capital to deploy, but the challenge will be to find good investments at good prices and, given fierce competition, to find an edge.”
 
Using Mergermarket data, Defying the odds: the rise of European private equity highlights the key factors and trends that are driving dealmaking across Europe, focusing on some of the key markets in terms of size and activity, including the Nordics and UK, as well as US firms coming into Europe. The report also provides insights into changing finance structures and recent financing trends.

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