PE Tech Report

NEWSLETTER

Like this article?

Sign up to our free newsletter

European PE buyouts dip to lowest level in a decade

Buyout activity across Europe’s private equity industry has dropped markedly in 2023, falling to the lowest level seen in terms of cumulative value and volume of completed deals since 2013, according to provisional data from CMBOR and Equistone Partners Europe.

Following record activity levels seen in the aftermath of the post-Covid period, the number of buyout deals completed in 2023 has fallen to 637 with an aggregate value €67bn – the first time in six years that value hasn’t surpassed the €100bn threshold.

By comparison, last year saw 776 deals worth €135bn completed while 850 deals worth €156bn completed in 2021.

Mid-market deals (valued at €50m to €500m) kept the industry ticking over, accounting for 25% of volume and 31.7% of value (159 deals completed with an aggregate value of €21.2bn), compared to 23% of volume and only 18% of deal value last year. This trend was particularly evident in the UK’s active mid-market, where the 43 buyouts valued at £6.6bn surpassed 2018 and 2019 in terms of both value and volume and was on par with 2022 value-wise.

Conversely, for the first time since 2017, mega-deals (buyouts valued at €1bn or more) accounted for less than half of total European buyout value, with 17 worth €32.3bn, bearing the brunt of the dealmaking slowdown and restricted access to debt financing in a higher-rate environment. However, large-cap buyout activity has shown signs of picking up as European central banks reach the end of an interest cycle and inflation begins to settle, with several landmark mega-deals across the continent poised to be completed over the coming months.

European exit activity experienced a less significant drop-off than buyouts, with the cumulative value of €84.1bn (from 321 deals) surpassing that recorded in 2019 and 2020. Notably, the cumulative value of trade sales to strategic buyers increased year-on-year, with €43.4bn worth of deals completed compared to €43.1bn in 2022.The greater fall in secondary sales to other PE firms reflected the bigger decline in buyout activity (€31.5bn completed in 2023; €56.2bn completed in 2022).

During this period, PE firms have continued to explore alternative avenues for deploying capital, pivoting towards supporting portfolio companies with strategic buy-and-build acquisitions. 752 deals totalling a cumulative value of €5bn have been completed, showcasing the industry’s continued focus on value creation amid challenging market conditions.

Dealmaking within traditional sectors such as Manufacturing (158 deals worth €14.1bn), Business & Support Services (110 deals worth €12.9bn) and Financial Services (31 deals worth €8.8bn) has held comparatively steady as firms seek value and stability in an otherwise difficult market. However, TMT and Healthcare, two sectors which experienced a remarkable pandemic-era boom, have experienced major corrections, with valuations and volumes both falling drastically. TMT saw 148 deals worth €8.6bn, a 75.6% year-on-year decrease in deal value and the lowest figure in over a decade. Meanwhile, healthcare deal volume (38) and value (€7.8bn) were at their lowest level since 2015 and 2016, respectively.

The UK market once again leads Europe in terms of both deal volume and value, with 160 deals totalling €16.1bn (£14bn). There were notable drop-offs across the continent, with France (98 deals worth €8.1bn) experiencing a significant slowdown, as well as the Netherlands (57 deals worth €1.8bn). Germany performed comparatively strongly (90 deals worth €12.2bn), with the market buoyed in particular by Advent International’s €3.9bn acquisition of DSM Engineering Materials.

Similar patterns played out in the exit market: the UK was the largest market, with 89 deals worth €23bn (£20.1bn), while Germany again performed comparatively well, ranking second in terms of value with 50 deals worth €19.5bn France ranked third, with 50 completed deals totalling €11.1bn.

Like this article? Sign up to our free newsletter

MOST POPULAR

FURTHER READING

Featured