Europe’s buyout industry continued to show appetite to deploy capital through the economic cycle, despite exceptionally challenging market conditions, according to provisional full-year data from CMBOR, the Centre for Private Equity and MBO Research based at Nottingham University Business School and supported by Equistone Partners Europe.
The 707 buyouts completed in 2022 were worth a cumulative €117.5 billion, a sharp fall from the 827 deals worth €153 billion completed last year, when the industry’s rebound from pandemic disruption drove record post-crisis levels of activity. However, despite war in Europe, soaring inflation and debt markets tightening, the total value for 2022 was higher than both 2019 and 2020 – boosted by the long-term upward trend in average buyout size (€166.2 million, the fourth highest total on record). The €100 billion mark has therefore emerged as the industry’s new ‘floor’ for aggregate buyout value after the threshold was crossed for the sixth consecutive year. That historic run has also helped carry the total value of European buyouts in the preceding decade past €1 trillion for the first time.
Tellingly, exit activity has not remained as robust, as buyers involved in exits have pulled back. Outside of 2020, this year saw the lowest volume since 2009 and third-lowest annual value since 2013 (367 exits worth €94.6 billion). The relative uptick in secondary buyouts as an exit route (194 valued at €54.4 billion – the highest proportion of volume this millennium, at 54.0%, and second-highest share by value, at 57.6%), compared to the declines seen for both trade sales (163 valued at €40.1 billion) and floatations (just one, down from 29 in 2021), points to private equity buyers’ greater appetite to deploy capital in periods of dislocation. This sustained pace of acquisitions, combined with subdued exit activity, is likely to lead to a ‘pig in the python’ effect, whereby firms will need to staff up in order to digest swelling portfolios.
The UK market was once again the busiest by volume and largest by value, with 189 buyouts totalling €41.5 billion (£35.2 billion). France ranks second in terms of volume, with deals having risen to 127 from 112 year on year, despite a broader Europe-wide slowdown. These activity levels are, however, being driven by smaller buyouts, with larger deals having declined significantly and cumulative deal value falling to its lowest aggregate value in over a decade (€7.9 billion in 2022 compared to €22.3 billion in 2021).
Meanwhile, the Netherlands experienced the inverse of France, representing the second largest market by value, totalling €23.6 billion, from 47 deals, the country’s lowest total since 2013. The Dutch market’s share of value can be attributed to the outsized impact of KKR’s €7billion investment in Refresco, 3G Capital’s €6.3 billion buyout of Hunter Douglas and Apax Partners and Warbug Pincus’ €5.1 billion acquisition of T-Mobile Netherlands, which represented three of the year’s four largest buyouts. Germany saw 98 deals, down from 132 in 2021, valued at €10.6 billion.
Despite the well-publicised rout in tech valuations, TMT continued to attract sizeable investment and was highest in terms of volume (177 deals) and value (€29.2 billion) among all sectors for the very first time. Amid the inflationary environment, food and drink performed well by aggregate value (€14.3 billion from 27 transactions), while business & support services performed well volume-wise (105 deals, the most since 2018).
