European PE deal activity surged in Q1, says Pitchbook

Upwards trends

European private equity deal activity value and volume increased to quarterly records spurred by increasing middle-market and micro-cap activity, respectively, according to PitchBook’s newly released Q1 2021 European Private Equity Breakdown report.  

Deal value and volume both accelerated to quarterly records supported by increased middle-market activity (deals sized between EUR100 million and EUR500 million) and rising micro-cap transactions - deals sized under EUR25 million.

The report showed that 1,936 transactions closed in the first quarter for a total of EUR158.8 billion, which represents a year-on-year increase of 79.9 per cent and 28.5 per cent, respectively.

Revival in the leveraged lending markets, sellers taking advantage of heightened valuations, and pent-up demand from GPs ready to deploy the abundant amounts of dry powder available, all converged to heighten deal activity in the beginning of the year, according to Pitchbook.

The majority, or 24.7 per cent, of deal value came from the IT sector - the highest figure on record so far. And 70.8 per cent of buyouts were bolt-on acquisitions, indicating that buy-and-build strategies are currently of central importance to sponsors’ investment strategies.

Exits also picked up, with the first quarter’s exit value reaching a new quarterly high. European private equity-backed IPOs experienced higher activity in the first quarter, with more than EUR30 billion in IPO exit value as sponsors cashed in amid public equity investors’ readiness to pay premium prices for growth assets.

Pitchbook's report highlights the fact that not only is this Europe’s highest quarterly IPO exit value since Q2 2011, but it's also on track to achieve a new yearly IPO exit value high. Capital raised and the number of funds slowed down in Q1 2021, however.

On the fund count side, most funds originated from the upper-middle-market segment funds sized between EUR500 million to EUR1 billion including the remotely raised PAI Mid-Market fund.