The European private equity industry has rebounded strongly in the last 12 months following the initial shock of Covid-19-induced lockdowns, new data suggests.
The volume of private-equity-backed acquisitions in Europe fell to its joint-lowest level since mid-2009 during the first wave of the pandemic according to research from the UK’s the Centre for Private Equity and MBO Research.
But after just 102 transactions were completed in Q2 2020, the industry quickly recovered to pre-Covid-19 activity levels, the firm’s provisional half-yearly data announcement reveals.
The 791 buyouts that took place in the past 12 months, with a cumulative value of €116.6bn, exceed the corresponding figures for 2019 (716 deals with an aggregate value of €112.4bn) and approach the post-2008 high-water mark set in 2018 (811 deals valued at €124.7bn).
CMBOR said the resurgence in deal-making since Q3 2020 was also in evidence in exit activity, as private equity investors made 354 realisations totalling €98.9bn in value, compared to 360 exits with a value of €73.7bn in 2019.
That too followed a decade-low exit volume of just 46 sales in Q2 2020.
CMBOR said the industry’s focus on portfolio management in the early months of the pandemic was reflected not only in the temporary dip in new deal activity, but also the historically low levels of insolvencies that took place in the subsequent year.
In the UK, for example, after an initial spike in insolvencies, or ‘creditor exits’, in Q2 2020, to 17, only six more were recorded in the 12 months to Q2 2021 – less than half the next lowest level in any calendar year this millennium.
Dominic Geer, senior partner at Equistone – which sponsors CMBOR – said, “The lull in deal activity that we saw in Q2 2020 was a function of how private equity firms were intensely focused on providing operational and financial support to their investee companies when Covid first struck Europe.
“What we have seen since then is testament to the successful response of the industry in this initial crunch period.
“GPs have sufficiently addressed issues within their portfolios to be able to resume backing businesses and realising value.
“Meanwhile, abetted by government stimulus measures, even the worst-affected sponsor-backed companies have by and large received the support required to stay afloat in a phenomenally challenging environment.”
Europe’s three traditionally biggest private equity markets were the primary drivers of the rebound in buyout activity.
The UK remained largest by volume over the past 12 months with 207 deals that totalled £24.4bn (€27.4bn), fuelled by a robust mid-market: buyouts in the £50m-£500m range accounted for 29.3% of total value, up from 16.6% in 2019.
Germany ranked highest by aggregate value, with 138 buyouts valued at €35.3bn in the same period, while France recorded 105 deals valued at €14.3bn.
CMBOR said the widespread shift to remote working and catalytic effect of lockdowns on digital adoption buoyed investment in TMT businesses, displacing manufacturing as Europe’s most active sector, with 200 buyouts valued at €24.4bn since H2 2020.
Christiian Marriott, fundraising and IR partner at Equistone, added, “It is little surprise that, in a period of severe economic disruption and structural change, private equity investment flowed into those businesses most optimised for or resilient to Covid.
“After a brief hiatus, it is Europe’s most established private equity markets that proved most active for buyout firms looking to deploy their institutional capital, particularly in the thriving mid-cap segment.”
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