With European private equity having started the year on rather uncertain ground, James Tracey looks at recent figures to explore what trends are on the horizon and suggests that, as we approach 2020, the outlook for the industry is looking far more positive…
THE STORY SO FAR
There’s no doubt that, particularly in the middle market, European private equity has been extremely competitive throughout 2019, with the result that fundraising and new fund launches have been, generally speaking, underwhelming.
However, as we come closer to the end of 2019, the future is looking much brighter, with European private equity deal value soaring in the third quarter of the year to €122.7 billion, representing a 24.8% uptick quarter-on-quarter, according to figures from PitchBook (‘European PE Breakdown, Q3 2019’).
The industry has bounced back considerably in the latter half of the year, with this bolstered deal value standing in stark contrast to the rocky start for European private equity at the beginning of 2019, when we witnessed a large decline following a record showing in terms of deal value in 2018.
In addition to this deal value growth, the same figures also point to an acceleration in capital commitments for private equity growth funds, with PitchBook even hinting that we could be on track for “a record year”.
Not only that, but European private equity fundraising is also “on track” to hit the third-highest annual level on record with €51.6 billion raised across 64 funds.
It really has been a game of two halves this year, and this all chimes with what we are seeing at JTC too, with a healthy amount of private equity enquiries converted in 2019 and more in the pipeline.
Nevertheless, there are a number of key issues on the horizon too, that managers and investors will need to keep close to if we are to maintain this momentum.
THE ‘B’ WORD
Unsurprisingly, there’s been considerable focus on what Brexit might mean for private equity in the UK this year.
If there’s one word that has tended to define the environment in 2019, it is ‘uncertainty’ – but, despite concerns surrounding Brexit and ‘uncertainty’ in the UK, deal volume in the UK and Ireland has actually remained fairly resilient, according to PitchBook figures.
Whilst all European regions experienced declines in private equity deal volume quarter-on-quarter, the UK and Ireland posted the second-smallest decline (-12.5%).
Of course, it’s inevitable that Brexit would have an impact on the European landscape at large, but the fact that the macroeconomic headwinds associated with it, and which were predicted to affect the UK in particular, have had a much smaller impact on the UK than they have on most other European regions is a really positive reflection of the strength and optimism in the UK market.