The Active Private Equity Landscape in Europe

European Private Equity Activity Trends

• Sponsored deal volumes in Europe are up 25% year-on-year in the first two months of 2021, driven by strong comparisons against a similarly robust 2020 start.
• Activity is broadly based across sectors and deal types, including primary deals, secondaries, IPOs, and secondary buyouts.
• Approximately 50% of deal volumes are concentrated in Technology, Media, and Telecom (TMT) and Healthcare, sectors viewed as structural growers benefiting from long-term secular trends.
• Funds are increasing exposure in these sectors to address perceived underweight positions and capture market opportunities.

European Tech Market Evolution

• Over the past 24–36 months, a significant emergence of large European tech companies has occurred, accelerating notably in the last 12 months.
• While U.S. VC funding remains larger in absolute terms, European VC fund growth rates are catching up and, in some instances, exceeding U.S. growth levels.
• A robust IPO market and pipeline have developed specifically around high-growth European tech companies.

M&A and Transaction Types

• Sponsor M&A activity is expected to continue aligning with broader market trends.
• Secondary Buyouts (P2Ps): There were 21 secondary buyouts between 2019 and early 2021; 11 of these occurred in the past 12 months, marking a significant acceleration.
  • This trend reflects public boards' increased receptivity to private equity bids.
  • Private equity players are justifying premiums with value creation theses, believing they can drive greater value in a private setting.
• Carve-outs: Activity continues as primary deals where PE firms acquire businesses previously owned by corporate entities.
  • Recent examples include Advent and Cinven acquiring ThyssenKrupp's elevator business and a consortium of Sinman and Bain acquiring Lonza's special chemical business.
  • The rationale is that PE skill sets can unlock value in businesses that larger corporates cannot.
• Secondary Markets: The market remains active but is becoming more segmented.
  • Mid-market firms with regional footprints are increasingly selling to global sponsors or those with specific M&A platform capabilities.
  • Successful transactions require a strong, explicit rationale that the new sponsor can drive more value than the previous owner.

Market Participants and Capital Deployment

• The landscape has diversified from U.S. buyout dominance to a broad ecosystem including:
  • Large multi-line alternative asset managers (managing buyout, growth, infrastructure, and credit strategies).
  • Global buyout-focused funds ($10–$15 billion per fund).
  • Regional mid-market funds (e.g., DACH, Nordic, UK, France) that are expanding their scope.
  • Direct investors, including family offices, single-family offices (SFOs), and SPACs.
• Clients are aggressively deploying capital despite high valuations, driven by a supportive capital markets environment.
• Valuation Challenges: Clients acknowledge high valuations in TMT and Healthcare but view private equity as a necessary vehicle for yield and differentiated returns in a low-interest-rate environment.
• Investment decisions are increasingly predicated on a robust value creation thesis, including cost savings, automation, and digitalization.

ESG and Industry Outlook

• ESG is receiving extreme focus across the sponsor community through environmental, social, and governance initiatives.
• Environmental: Clients are launching or considering impact funds and net-carbon-zero oriented funds, exemplified by the Mark Carney and Brookfield climate initiative.
• Social and Governance: There is a push for diversity, inclusion, and stronger governance frameworks.
• Industry Call to Action: The speaker identifies the challenge of translating ESG commitments into "daily blocking and tackling" to drive real change.
  • There is a呼吁 for the finance industry to collaborate across peers and competitors to build a more robust, diverse, and foolproof industry.