European PE Fundraising Hit New Annual Record in 2019, Despite Ongoing Geopolitical Uncertainty

SEATTLE, Jan. 24, 2020 /PRNewswire/ -- PitchBook, the premier data provider for the private and public equity markets, today released its 4Q 2019 European PE Breakdown, revealing European private equity (PE) deal activity remained robust, totaling €453.5 billion across 3,867 deals and nearing 2018's record high. Despite the geopolitical uncertainty, deal activity in the UK and Ireland remained strong as well, particularly in sectors like IT, which hit a new annual record in deal value. PE exit activity continued to decline, with IPO exits reaching a nine-year low. The decrease has been driven by continued growth in bolt-on investments, the proliferation of buy-and-build strategies and larger portfolio/platform entities. Notably, PE fundraising set a new annual record with €86.4 billion raised across 89 vehicles. This came as fund counts dropped to the second lowest figure in over a decade and funds in the €1 billion to €5 billion bracket grow by 62.5% year-over-year, indicating LP capital is chasing larger but fewer funds.

"After another year of geopolitical uncertainty, 2019 set a new annual record for European private equity fundraising, graduating the asset class from the fringes of the capital markets and moving it closer to the mainstream," said Dominick Mondesir, EMEA Private Capital Analyst at PitchBook. "As PE firms expand their offering, we are seeing more institutional investors recognize the value of diversified fund strategies. We expect 2020 fundraising to remain strong, with at least three Europe-headquartered firms set to return to market with flagship vehicles."

Investment Activity

• European PE deal activity totaled €453.5 billion across 3,867 deals, falling just shy of 2018's record totals for dealmaking (€464.5 billion across 3,995 deals).
• Median deal size increased year-over-year by 34.1%, reaching a record high €30.8 million and helping propel deal value totals to near-record levels.
• The third quarter of 2019 saw the second-largest European buyout since the global financial crisis (a consortium of investors led by Sweden-based PE group EQT carved out Nestlé Skin Health (NSH) for €10.6 billion).
• Recession-resilient sectors like IT and healthcare posted year-over-year gains in deal value in 2019, contributing €79.0 billion or 21.4% and €36.1 billion or 9.8% respectively.
• Israel – featured in the report's 'Spotlight' section – closed 28 PE transactions worth €3.5 billion in 2019, logging year-over-year increases of 12.0% and 90.9%, respectively.

Exits

• European PE exits dropped significantly with 900 exits closing for a total of €201.7 billion. This marks the lowest volume in seven years and the lowest exit value in six years. This was driven partly by continued growth in bolt-on investments, which accounted for 44.0% of overall deal volume compared with 29.1% a decade ago.
• Median annual exit size dipped to €120.5 million in 2019, in part because the median exit size for SBOs, which have served as the largest source of exit value in the past few years, decreased to €150.0 million from €160.1 million in 2018.
• PE firms continue to rely on IPOs less and less, with 29 firms exiting for €20.4 billion, registering the lowest IPO value and volume figures since 2012. Corporate acquisitions have picked up much of the offset in IPOs, with 399 closed in 2019 for a total of €73.6 billion.
• IT accounted for a record 24.2% of total exit value in 2019, up from 17.0% in 2018. In a rare bright spot for European IPOs, SoftwareONE's listing was oversubscribed, with the company raising €634.1 million in secondary sales.

Fundraising

• European PE fundraising hit a record high in 2019, with €86.4 billion raised. Nearly three-quarters of total capital was raised in just two regions: the UK & Ireland and France & Benelux. The UK & Ireland accounted for €45.8 billion in capital raised across 34 funds, marking year-over-year increases of 46.0% and 9.7%, respectively. The French & Benelux region raised €17.7 billion, a new annual record and more than double 2018's total of €8.4 billion.
• Mega-fund closures remained static with just five vehicles closing at or above €5 billion in 2019, marking a 18.4% increase from 2018. Chief among the 2019 roster was Permira's seventh €11.0 billion buyout fund.
• The majority of European PE capital raised continue to be driven by buyout funds, which have raised €74.3 billion across 61 funds in 2019, reflecting year-over-year increases of 25.7% and 5.2% respectively.
• The potential for lower valuations, less competition and a larger and differentiated pool of targets contributed to a raise of €12.0 billion across 27 growth equity vehicles, up from €4.4. billion across 16 funds in 2018.

Additional coverage in this report includes:

• Introduction
• Overview
• Spotlight: Israel
• Exits
• Fundraising

Download the full report here.

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