Mid-2024 EU Private Equity: Growth in Exits & M&A Deals

As we approach the latter half of 2024, European private equity (PE) is experiencing a robust recovery. After a tumultuous period shaped by global uncertainties, the market shows signs of renewed vigor in mergers and acquisitions (M&A) and a resurgence in exits, including a notable rise in Initial Public Offerings (IPOs).

It’s clear that the confidence is returning, and firms are taking advantage of more favorable conditions to close deals that had been on hold.

Ivo Schmiedt

Founder, CEO & General Counsel

This report synthesizes insights from various industry reports to offer a comprehensive overview of key trends, sector performance, and regional variations in the European PE landscape.

Resurgence in M&A and Private Equity Exits

The private equity sector in Europe has seen a considerable upswing in M&A activity during 2024. 65% of industry experts forecasted an increase in deals earlier this year, and we are witnessing this unfold, primarily driven by the closure of postponed exits from 2023 [1].

Private equity deal value in Q2 2024 alone reached US$11.5 billion, with 31 significant deals in the European power industry alone, an increase of 188% in value compared to the previous quarter [4].

Private Equity Deal Value Power Industry

57% of PE professionals delayed their exits in 2023 due to inflation, high interest rates, and geopolitical conflicts, resulting in a longer investment horizon [2].
The IPO market has rebounded strongly, with ten mega-IPOs completed in 2024, making this year the best for PE-backed IPOs since 2021 [3].

The broader market recovery is supported by easing monetary policies and stabilizing valuations, pushing PE firms to act on previously delayed exit strategies.

According to the International Monetary Fund (IMF), the European Central Bank (ECB) is expected to gradually loosen its monetary policy stance, depending on macroeconomic data. The IMF noted that the disinflation trajectory and balanced risks suggest that interest rates could be gradually lowered, with the ECB likely reaching a neutral policy rate of around 2.5% by the end of the third quarter of 2025.

The growing interest in PE-backed deals is driven by long-term performance expectations.

As Merrick McKay, from Patria Global Private Market Solutions, highlighted,

Private equity has outperformed listed markets over the long term. Because private equity is geared towards long-term performance, it’s perfectly suited to drive pension funds’ performance. [7]

The big shift in Q2 instead of Q1 likely reflects the time it takes for markets to adjust to stabilized conditions after a period of disruption.

While the start of the year may still have been marked by lingering uncertainty from the previous year’s geopolitical and economic challenges, by Q2, investor sentiment and confidence likely began to improve.

Economic and Geopolitical Factors Continue to Shape the Market

While the PE market has seen positive growth in 2024, it continues to be shaped by the lingering effects of global disruptions. The combined impact of the pandemic, inflation, and wars in Ukraine and Israel caused significant delays in planned exits during 2023.

PE professionals reported an average extension of 13 months to their investment horizons [2].

Some of the critical challenges and ongoing market dynamics include:

Capital Raising Difficulties

71% of surveyed PE professionals found raising capital more difficult in 2023 [2].
37% of the professionals expect these difficulties to continue into 2024 [2].
Fundraising timelines extended to an average of 15.8 months in 2023, up from 13.1 months in 2008 [8].

Inflation and Interest Rate Concerns

Despite the rise in deal activity, inflation and high interest rates remain significant concerns [8].
Some stability has returned, with expectations that monetary tightening will ease further as 2024 progresses [8].

Bright Spots and Resilience in Private Markets

According to the Private Markets Global Trends Report, “Private market players have shown remarkable resilience, navigating issues like inflation, supply chain disruptions, and geopolitical instability.” [8]

Fundraising Remains Stable - Total private capital fundraising stayed stable at US$1.1 trillion in 2023 and is projected to reach US$1.5 trillion by 2028, surpassing 2021's record year [8].
Shift Towards Established Managers
- A third of the US$506 billion in new capital allocated to private equity in 2023 went to the top 25 competitors, favoring established firms with multiple strategies [8].
- Emerging managers face more challenges but are finding niches through specializations [8].
New Sources of Capital - PE firms are tapping into alternative capital sources, including high-net-worth individuals, insurers, and non-US investors, particularly in the Middle East [8].

The shift in perspective toward the Middle East as a new capital source likely stems from its growing wealth and strategic positioning in global markets.

Despite being a factor in delays due to geopolitical instability in 2023, investors and PE firms now recognize the region’s potential as it diversifies beyond oil into more stable, long-term investments.

High-net-worth individuals, insurers, and sovereign wealth funds from the Middle East are becoming increasingly active, offering fresh avenues for capital amid ongoing global uncertainty.

Sectoral Opportunities and Future Trends

Digital Disruption - AI, cloud computing, and digital infrastructure offer major investment opportunities for private market players [8].

Global private investments in AI are expected to reach US$58 billion by 2025, up 72% from 2022 levels [8].
70% of new value created globally in the coming decade is expected to be based on digitally-enabled business models [8].

70% of new value created globally in the coming decade is expected to be based on digitally-enabled business models.

Infrastructure
- Despite a dip in 2023, the sector remains robust, with infrastructure investments acting as a hedge against inflation and market volatility [8].
- Energy transition from fossil fuels to renewables is driving infrastructure deals, especially in regions like the Middle East [8].
Private Debt - Private debt continues to grow, with assets under management projected to more than double to US$ 3.5 trillion by 2028, providing tailored solutions and floating rates that offer stability in volatile markets [8].

The power sector has been a bright spot in this complex environment, with significant deals like Brookfield Renewable Partners' US$5.8 billion buyout of Neoen marking significant milestones in PE activity [4].

Regional Variations and 2025 Predictions: DACH and Nordics Lead, Central & Eastern Europe Lags

The private equity market in Europe experienced significant fluctuations between 2023 and 2024.

Deal value saw a decline of 24.48% in 2023 and a further decline of 15.52% in 2024 due to various macroeconomic pressures and geopolitical uncertainties. However, projections for 2025 suggest a potential recovery, with a 4.65% increase in deal value expected [10].

Private Equity Deal Value and Change in Europe

In terms of deal value, the European private equity market recorded US$ 0.37 trillion in 2023, followed by a reduction to US$ 0.31 trillion in 2024. Moving forward, 2025 is projected to see a slight improvement, with the total deal value expected to rise to US$ 0.33 trillion. This reflects cautious optimism as market conditions begin to stabilize [10].

Regionally, the DACH region (Germany, Austria, Switzerland) and Nordics have emerged as key drivers of private equity growth in 2024.

The DACH region saw 540 transactions in 2023, with the total value of deals rising by 15% to €50.7 billion, reflecting an appetite for high-quality assets even in challenging economic conditions [6].

In the Nordics, 67% of PE professionals expect M&A activity to continue growing throughout 2024, bolstered by investment in green transition and technology sectors [3].
Conversely, Central & Eastern Europe is seeing slower growth, though over half of respondents still expect positive deal activity for the remainder of the year [1].

While short-term fluctuations have affected deal value, the long-term prospects for private equity remain strong in regions that are adapting to new market dynamics. Investment in innovation, sustainability, and technology will be key to sustaining growth across Europe.

Ivo Schmiedt

Founder, CEO & General Counsel

Sectoral Trends: Technology and Healthcare Still on Top

As in previous years, the technology, media, and telecommunications (TMT) sector remains the top performer in European private equity, accounting for 35% of all deals and 32% of total transaction value in 2023 [6].

The continued dominance of technology and healthcare in 2024 is driven by the scalability and resilience of these sectors.

In the power sector, US$11.5 billion worth of deals were completed in Q2 2024, showing significant PE investment in renewable energy [4].
Pharma & healthcare remain equally attractive, with robust investment activity driven by innovation and demand for scalable solutions [1].

According to McKinsey, The next few years are expected to see heightened deal activity in the biopharma industry, driven by large companies accumulating cash reserves and the attractive valuations of potential targets following recent market downturns, presenting solid opportunities for value creation.

They also believe that

companies that can activate a portfolio rotation effort through programmatic M&A&D and deploy thoughtful dealmaking approaches, responding to market trends and opportunities, will be best positioned to advance their overall strategies and outperform their peers.

On the other hand, traditional sectors like automotive and construction have seen lower deal activity, reflecting weaker market fundamentals and limited growth potential [2].

Increased Focus on Small- and Mid-Cap Deals

Private equity firms have increasingly focused on small- and mid-cap segments as financing for larger deals becomes more challenging.

73% of PE professionals reported that smaller deals are becoming more attractive due to easier financing conditions and opportunities for portfolio diversification [2].

The growth of lower mid-market transactions reflects a shift in strategy among PE firms, which are now more focused on buy-and-build plays and add-on acquisitions to generate value [9].

In the European market, small- and mid-cap funds have demonstrated stronger performance compared to larger funds. This trend can be attributed to lower competition in smaller deals and healthier market dynamics.

Fund-raising in European large buyout funds is well above the long-term trend, leading to greater competition and inflated prices [11].
Small and mid-cap buyout fund-raising, while still elevated, is more balanced compared to large funds, offering better entry multiples and investment opportunities [11].

This graph shows the growing imbalance in private equity fundraising. Large-cap funds are seeing excessive capital inflows, creating more competition for deals, whereas small/mid-cap funds are experiencing more moderate growth in fundraising, which makes them more attractive to PE firms seeking better value and higher returns.

Small- and mid-cap funds have outperformed large funds in terms of net total value paid in (TVPI) for fund vintages post-2005 [11].
Small- and mid-cap funds have also delivered higher internal rates of return (IRR) than large-cap funds since 2009 [11].

Balanced growth in deal flow has further contributed to the attractiveness of small- and mid-sized private equity funds. Over the last decade, annual deal flow in small and mid-market funds across Europe has grown at 2.7x, compared to 1.6x growth in large deal flow.

By contrast, fund-raising in large-cap funds has increased at a much higher rate of 14.9x, further driving competition and higher entry multiples [11].

This suggests that small- and mid-cap funds are not only more competitively priced but also better positioned for future growth.

These deals, particularly in sectors like technology and renewable energy, offer cost-reduction opportunities and faster returns, making them highly attractive in the current environment [4].

The balanced growth of smaller deals has allowed European private equity firms to focus on value creation, portfolio diversification, and long-term returns without the risk of overbidding that often accompanies larger deals.

Ivo Schmiedt

Founder, CEO & General Counsel

A Promising Recovery in IPOs

Mid-2024 has seen a significant uptick in PE-backed IPOs, marking a recovery after a multi-year slump. According to PitchBook’s Q2 report, the year is on track to be the best for IPOs since 2021, with 23 mega-exits recorded so far [3].

This resurgence has been driven by the stabilization of equity markets and favorable conditions for public listings.

The median EV/EBITDA multiple for PE buyouts rose to 12.1x by mid-year, signaling renewed confidence in deal valuations [3].
Take-private transactions accounted for a significant portion of PE deal value, particularly in the UK, where they comprised nearly 50% of the total value [9].

Despite the positive trends, some caution remains, with certain companies, such as Golden Goose, still postponing their listings amid uncertain market conditions [3].

European PE’s Superior Performance and Outlook

According to Invest Europe's latest report [5], European private equity continues to outperform its global peers, with net IRRs in the mid-to-high teens for buyouts and growth capital.

European PE also exhibits strong money multiple returns, with buyouts achieving a 1.7x TVPI, outperforming major benchmarks such as MSCI Europe and S&P 500 [5].

The report highlights:

45% growth in European PE fundraising, nearly matching the record-high levels of 2021, showcasing the sector's resilience [9].
European venture capital is also delivering exceptional results, with money multiples over 2x, outperforming North American VC funds [5].

As Europe’s next-generation managers continue to outperform established players, there is a clear shift toward nimble, entrepreneurial leadership, which is driving superior risk-adjusted returns across the region [5].

According to Elias Korosis, Vice-chair, LP Council & Chair-Elect at Invest Europe,

the report proves that European PE performance is ‘standing tall’ across all segments, with mid-market buyouts driving with consistency growth capital maturing with track records deepening, and venture capital delivering exceptional returns on a wider range, as expected.

** This report is provided for informational purposes only and is not intended as investment, financial, legal, or other professional advice. The data and insights included in this report are based on publicly available sources and reputable industry reports as of 2024. While every effort has been made to ensure the accuracy of the information presented, the authors and contributors do not guarantee the completeness or reliability of the data.

The performance and trends described herein are subject to market risks and macroeconomic conditions that may evolve. The opinions and forecasts presented reflect the views of industry experts at the time of publication and are subject to change without notice.