European Private Equity Deal and Fundraising Activity Near Record Highs in 2020 Despite COVID-19

·6 min read

SEATTLE, Jan. 22, 2021 /PRNewswire/ -- PitchBook, the premier data provider for the private and public equity markets, today released its 2020 Annual European PE Breakdown Report, which found European private equity (PE) dealmaking rebounded from COVID-19 pressures to record its third-highest annual value in over a decade. After an initial pullback in Q2 2020, demand for new debt issuance and lofty dry powder levels encouraged sponsors to pursue acquisitions of discounted assets that were cyclically but not secularly under pressure. Managers moved quickly to close on assets that benefitted from the transition to a virtual workforce, leading to record deal volume in the information technology (IT) sector. Fundraising also experienced a strong year, with capital raised hitting its second-highest value despite lower fund counts. Large, brand-name managers with long-standing LP relationships generally benefitted from the remote fundraising environment as allocators reupped with existing GPs. Unlike deal and fundraising numbers, exit activity was lethargic in 2020 as sponsors waited for a more sanguine environment to offload assets and managers opted to invest more into portfolio companies. However, exits are likely to bounce back later in 2021 as governments begin to loosen restrictions and SPACs become a meaningful liquidity path for European PE-backed companies.

(PRNewsfoto/PitchBook)
(PRNewsfoto/PitchBook)

To download the full report and underlying data, click here.

"European private equity dealmaking proved to be incredibly robust and resilient, notching its fourth highest deal volume figure in 2020 after slumping over 30% year-over-year in Q2 when Europe was confronted with its worst economic outlook since the Great Depression," said Dominick Mondesir, PitchBook EMEA Private Capital Analyst. "Looking to 2021, we expect the risk-on atmosphere paired with the record €294.0 billion in European PE dry powder will propel deal activity to a new high, epitomized by tight credit spreads, pent up demand, willing sellers and low interest rates. When analyzing previous downturns, it took managers around one year post-crisis to deploy capital at scale, and we expect outsized figures in 2021 to reflect that trend."

Investment Activity

  • European PE invested €449.1 billion across 4,179 deals in 2020 —a minor year-over-year decrease of less than 3% on both the value and volume front. Deal volume reached a new quarterly peak in Q4 2020 with over 1,200 transactions.

  • The use of bolt-on deals, one of many trends underway pre-pandemic, accounted for a record 61.4% of all buyouts in 2020. The strategy was especially prevalent in the IT sector, where bolt-on deals represented 56.8% of all closed IT transactions.

  • IT deal activity hit record proportions on both a value and volume basis in 2020, making up 21.7% and 25.9%, respectively, of overall European PE deal flow. The IT sector has been the number-one source of interest for PE managers over the past five years and will likely remain so for the next decade.

  • The average deal size hit a new annual high of €248.9 million after collapsing in H1 2020—a 22.3% year-over-year increase from 2019. The average deal size was buoyed in Q3 3030 when a consortium of investors carved out Germany-based ThyssenKrupp elevator business for €17.2 billion, making the transaction the largest European LBO in over a decade.

Exit Activity

  • European PE exit volume and value fell by 18.3% and 10.9%, with under 1,000 exits closed for a total of €233.6 billion. Exits sized under €25 million saw approximately 50% slashed off the 2020 volume, the largest of any exit size bucket.

  • For the first time on record, sponsor-to-sponsor deals (SBOs) accounted for as many exits as corporate acquisitions, though both saw substantial declines. SBOs and corporate acquisitions accounted for 333 exits apiece in 2020—year-over-year drops of 34.5% and 38.9%, respectively.

  • Although IPOs lagged, accounting for less than 5% of exit volume, they represented the smallest year-over-year fall of all exit types in Europe at less than 10%. The combined €24.7 billion listings of Netherlands-based JDE Peet and Poland-headquartered Allegro were the two largest exits of 2020, underpinning public equity investors' willingness to pay astronomical valuations for growth.

  • Close to 20% of all exit volume came from the IT sector, up from 12% a decade ago and reaching a new high. The bulk of PE assets that are actively trading have been in sectors benefiting from the pandemic due to valuations holding steady and, in some cases, rising. This helps explain why the median exit size ticked up 10.1% in 2020 to €114.2 million in 2020.

Fundraising Activity

  • European PE firms raised €92.0 billion across 90 funds, marking both the second highest value ever and the lowest fund count in a decade.

  • Median and average PE fund sizes jumped to record highs in 2020 at €377 million and €1.1 billion, respectively, as established managers generally uncovered more success in the remote environment than nascent sponsors.

  • Median time to close for funds sized greater than €1.0 billion also dipped to 10.8 months from 13.7 the previous year. CVC closed the largest European buyout fund in 2020 at €21.3 billion in seven months.

  • Mezzanine capital commitments set a record with €11.1 billion raised across the strategy, near equalling growth equity commitments for the year as the COVID-19 pandemic brought on strong demand for non-investment-grade credit platforms. However, the bulk of mezzanine annual commitments came from one PE mega-fund (€5 billion+) closed by HPS Investment Partners.

Additional coverage in this report includes:

  • Introduction

  • Overview

  • Deals by size and sector

  • Spotlight: 2021 European PE Outlooks

  • Exits

  • Fundraising

For more information about PitchBook, click here.

About PitchBook
PitchBook is a financial data and software company that provides transparency into the capital markets to help professionals discover and execute opportunities with confidence and efficiency. PitchBook collects and analyzes detailed data on the entire venture capital, private equity and M&A landscape—including public and private companies, investors, funds, investments, exits and people. The company's data and analysis are available through the PitchBook Platform, industry news and in-depth reports. Founded in 2007, PitchBook has offices in Seattle, San Francisco, New York and London and serves more than 45,000 professionals around the world. In 2016, Morningstar acquired PitchBook, which now operates as an independent subsidiary.

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