Despite the war in Ukraine, frayed supply chains, and soaring inflation levels, the European private equity industry expects a busy year ahead, according to a forecast survey undertaken by investment research firm Third Bridge and M&A specialist, Mergermarket.
Despite the war in Ukraine, frayed supply chains, and soaring inflation levels, the European private equity industry expects a busy year ahead, according to a forecast survey undertaken by investment research firm Third Bridge and M&A specialist, Mergermarket.
In a survey of mid-cap PE firms, most respondents expected the level of new acquisitions they make to increase (54%) or stay the same (32%) in the coming year. Larger mid-market funds were more likely to expect their number of deals to increase: 42% of respondents whose last fund was worth €500m or more anticipate a ‘significant increase’ in the number of acquisitions they make next year (26% expect a slight increase while 26% say it will stay the same).
Not only are funds set to make more acquisitions, but they are also expected to be even more valuable. Overall, 41% of respondents said they expect the average value of their new acquisitions in the next year to increase, rising to 61% amongst firms with funds worth €500m+. Breaking this down, around a quarter expect this to increase significantly and another 35% expect it to increase slightly.
Exits are also on the cards – Turning to the exit side of the PE investment lifecycle, 43% of respondents expect the number of divestments they make in the next year to increase and 31% expect their level of divestments to stay largely the same. There is once again a gulf between larger and smaller sponsors. More than half (55%) of respondents representing funds worth €500 million-plus expect the number of divestments they make in the next year to increase, including 26% who expect the number to increase significantly.
New markets and industries are attracting the attention of larger funds: Overall, 33% of respondents say they plan to diversify into new geographies and 30% say they will diversify into new markets. However, almost two-thirds (61%) of respondents representing firms with funds worth €500m-plus, plan to prioritise diversification into new geographic markets in the next year, with 52% saying they will focus on entering new industries.
