European Private Equity Dealmaking Picks up Momentum in 2Q 2018, Driven by Regions Outside of UK and Ireland

France and Nordic Regions Help Drive Dealmaking and Fundraising Activity, as UK and Ireland Remained Cautious Over Brexit

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PitchBook

Aug 02, 2018, 13:33 ET

SEATTLE, Aug. 2, 2018 /PRNewswire/ -- PitchBook, the premier data provider for the private and public equity markets, today released its 2Q 2018 European PE Breakdown Report, which found investment activity remained healthy in the first half of the year and capital invested is expected to reach the lofty levels achieved in 2015 and 2017, the highest performing years since the global financial crisis. Several large deals closed including Blackstone's €2.1 billion buyout of Cirsa Gaming and PAI Partners' €3.3 billion LBO of Refresco Group. Exits in the UK and Ireland increased as a percentage of overall exit activity—which slowed across regions—as dealmakers may be anticipating the impact of Brexit. Despite the slowdown in exits, Europe's PE Fundraising in 2018 is likely to end on a high note, potentially eclipsing the record setting figure of €79 billion achieved in 2017.

"We may be seeing the first signs of Brexit's impact on Europe's PE ecosystem," said Wylie Fernyhough, analyst at PitchBook. "Data suggests that dealmakers in the UK and Ireland are taking a more cautious, wait-and-see approach. Despite these potential warning signs, PE activity is still healthy on a historical basis."

Investment Activity

Following a lackluster first quarter, private equity deal flow increased in the second quarter with 804 European PE deals totaling €88.5 billion – a 19% and 20% increase over 1Q values, respectively. If this pace of investment continues, 2018 will be primed for another strong year.
Deal sizes also continued to swell. In the first half of 2018, 6.6% of all PE buyouts were over €500 million – up from 3.7% in 2013. Of total capital deployed, deals over €500 million increased from 40% in 2013 to 60% in 2018.
While the United Kingdom and Ireland continued to be strongholds for the PE industry, the France & Benelux (Belgium, Netherlands and Luxemburg) region achieved its highest percentage of deal value since 2010, at 29%. The uptick in activity is a signal of a maturing PE market across Europe.

Exits

Exit activity remained slow in the second quarter with 219 exits totaling €27.7 billion, bringing the first half exit value total to €53.6 billion, significantly less than the same timeframe last year at €88.4 billion.
On a relative basis, exit activity in the UK and Ireland hit the highest levels in a decade. The region accounted for 31% of all exits in 1H 2018, compared to 27% during the full-year 2017.
Secondary buyouts (SBO) made up 51% of exits, the highest proportion on record. Additionally, SBOs in Europe trended larger than corporate acquisitions for the first time. The European PE industry saw 12 SBOs over €1 billion in the first half of 2018, compared to 17 in all of 2017 and eight in 2016.

Fundraising

On the heels of a record 1Q 2018, PE fundraising slowed in the second quarter with 20 funds raising a combined €13.1 billion. The slowdown was to be expected given the accelerated pace of fundraising at the start of 2018.
Funds above €500 million accounted for 50% of capital raised through 1H 2018, up nearly five times from 11% recorded by this group in 2014.
The Nordic region made up for the slower pace of fundraising in the UK and Ireland. Extending the active fundraising ecosystem, EQT held a final close on its €10.8 billion EQT VIII buyout fund in the first quarter and Nordic Capital held a final close on its €4.3 billion Nordic Capital Fund IX in the second quarter.

Additional coverage in this report includes:

Key takeaways
Overview
Regional Spotlight: France & Benelux
Exits
Fundraising

Download the full report here.

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