Q2 deal activity "propelled to unseen levels", says Pitchbook

Dominik Mondesir, Pitchbook

Although private equity deal activity slowed down a bit in Q2 from the first quarter of 2021, the speed at which PE deals closed continued, leading to a massive uptick in deal value, according to Pitchbook's latest European PE Breakdown report.

In the second quarter of 2021, around 1,800 deals closed at a total value of EUR169.6 billion, the report showed - which represents a year-on-year increase of 161.2 per cent and 137.3 per cent, respectively. This constitutes Europe’s second-highest quarterly numbers so far, driven by activity in the core middle market.

The lockdown of economies around the world reshaped many sectors, while accelerating certain trends, such as the increased use of tech and remote working. Meanwhile, notes Pitchbook, the private equity industry has arguably never seen a more favourable environment for dealmaking.

The backdrop to this is that the strong leveraged lending markets, as a result of institutional investors’ ample liquidity, and hunt for yield have made financing and refinancing deals historically low-priced.

Currently, European high-yield credit spreads stand close to 2.9 per cent, just like before the global financial crisis hit. The data also shows that European leveraged loan issuance came in at a record high in Q1, demonstrating the high pace of PE dealmaking and investors’ willingness to finance higher yielding PE transactions.

Europe’s strong economic recovery, illustrated by its upward-sloping yield curve, has pushed the European Central Bank to raise its baseline growth forecasts for the region to 4.6 per cent in 2021. The recovery is predominantly driven by Europe’s vaccination rollout, as nearly 65 per cent of the EU’s population have now received at least one COVID-19 jab.

"Deal activity has propelled to unseen levels due to a combination of strong leveraged lending markets and an accelerating European economic recovery powered by rising vaccination rates", commented Dominick Mondesir, senior analyst, EMEA Private Capital at Pitchbook.