European buyout industry mounting recovery from deal drop-off of 2023

European private equity dealmaking is showing signs of recovery after a subdued 2023, according to the latest provisional half-year data from CMBOR, the Centre for Private Equity and MBO Research based at Nottingham University Business School and supported by Equistone Partners Europe.

There have been 327 buyouts in Europe in H1 2024 with an aggregate value of €49.6bn, compared to €42.0bn in H1 2023 and only €30.2bn in H2 2023. With over €40bn of additional buyout activity currently pending completion, the industry looks on course to pass €100bn in cumulative value by the end of 2024. That base level was comfortably cleared for six consecutive years from 2017 to 2022, until the recent dealmaking slowdown saw values plummet to €72.1bn in 2023, the lowest total since 2013.

This recovery has been fuelled in large part by a bounceback in larger-cap deal activity. The 11 ‘mega-deals’ valued at €1bn+ totalled €33.3bn – or over two-thirds of total value, a proportion which has not previously been reached in any full year in the past decade. By comparison, buyout volumes in the smaller-cap (<€50m) and mid-market (€50m-€500m) segments were roughly flat – 241 and 71 respectively, compared to 237 and 76 last half-year.

A pick-up in mega-deals correlated with a resurgence in public-to-private buyouts, where nine transactions were cumulatively valued at €21.7bn. The proportion of buyout activity accounted for by these ‘take-private’ deals has therefore increased threefold from last year, to 43.8%. However, the historically high levels of movement between public and private markets to date in 2024 applied in both directions. At the upper end of the deal size spectrum, PE is returning businesses to public markets too, with the €18.3bn of exit activity across six IPOs meaning that floatations account for a higher proportion of realised value than in any year this century.

Exits otherwise quieter

The relative prominence of a small number of large-cap IPOs is also partly a function of an otherwise quieter exit environment. Having experienced a less significant drop-off than buyouts last year, European exit activity has not yet mounted as significant an uptick in 2024. 

The 175 realisations valued at €45.4bn compare with 173 valued at €61.4bn in H1 2023 and 174 valued at €39.1bn in H2 2023. Secondary buyouts (93 valued at €17.5bn) have proven a much more reliable exit route than sales to trade buyers (66 valued at €9.6bn – having accounted for over half of all European exit value last year).

“A rebound in transaction activity that is weighted towards the upper end of the market, where take-privates and IPOs are starting to re-emerge, will benefit sponsors and LPs exposed to the large-cap segment. However, there are grounds for optimism that this may help unlock liquidity across the wider European private equity market. Distributions via IPOs or larger sponsors buying assets off other PE firms will help take LPs back below their allocation targets. That should, in turn, enable greater capital allocation to and deployment by private equity managers investing in smaller-cap and mid-market transactions.” 

Christiian Marriott, Partner and Head of Investor Relations at Equistone Partners Europe. 

UK, TMT and healthcare stand out

The UK has remained Europe’s largest and most active market, with 95 buyouts valued at €16.1bn (£13.8bn). Germany ranked second with 48 buyouts valued at €6.3bn; France came third in terms of volume, with 45, but at a cumulative value of €1.7bn – with the snap election likely to further impact activity in the near-term.

From a sector perspective, TMT and Healthcare reversed the major corrections they suffered in 2023 following a pandemic-era boom. TMT was the second most active sector by volume (70) and largest by value (€21.6bn – the sector’s highest half-yearly share in almost a decade). The healthcare sector performed strongly on both the buyout and exit side, with 20 buyouts valued at €8.0bn (almost equalling the 2023 full-year total of €8.9bn already) and 14 realisations valued at €15.8bn, surpassing the full-year 2023 total of €11.0bn.

Full details are in the 4 July 2024 press release from Equistone.