Defying the Odds: the rise of European private equity
2014 could be a standout year for European private equity deals
The European buyout industry is showing strong signs of recovery. Exit activity nearly came to a standstill following the financial crisis, but the number of exits has increased impressively so far in 2014. Indeed, IPO exits are up 350 per cent in the first quarter of the year compared to the same period in 2013.
We've seen an explosion in IPOs due to pent up demand which has been unleashed, but this will stabilise. There is a wall of money which is ready to be put to work but in a much more responsible and mature way.
Mid-market firms have led the revival so far. We also expect to see an increase in deals involving co-investments, with buyout firms partnering with other types of organizations to finance transactions.
The United Kingdom is likely to strengthen its position as Europe's leading private-equity hub over the next decade, with US funds flowing into Europe via London. And new entrants – including family offices and entities in Central and Eastern Europe – will bring new deal streams to London.
But the recovery is not limited to the United Kingdom. Across Europe, stabilising economies, rising stock markets and the easing of concerns about the sovereign debt crisis have helped to bring private equity firms back to life. This is evident in the deal pipeline across our European offices. In recent months, we have advised clients in Denmark, Germany, Holland, Iceland, Ireland, Norway, Poland, Serbia, Sweden and Switzerland, as well as in the UK. The number of European deals involving US companies is also rising.
In this report, we highlight the factors and trends that are driving deal activity across Europe. We focus on some key European markets, including the Nordic countries and the United Kingdom, and we assess activity from US firms coming into Europe. We also provide insights into changing finance structures and recent financing trends.
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Back on its feet: the European private equity picture
• Exit volumes in 2013 more than double 2009 levels • String of 24 European IPO exits in 2013 fuels optimism • 30 percent of European private equity buyouts in 2013 took place in Southern Europe • UK accounts for more than a quarter of European buyout volume and value • Pension funds and family offices have stepped up their buyout involvement • Industrials and chemicals businesses account for 24 percent of buyout volumes and 18 percent of value in 2013
An uneven recovery: country and sector focus
• Germany • France • Central and Eastern Europe • Sector watch
Infographic: the European private equity picture
• European buyouts, 2009 to 2013 • European exits by country, 2013 • Top five buyout sectors, 2013 • Top European buyout destinations, 2013 • US-sponsored buyouts in Europe, 2009 to 2013 • Deal size (exits and buyouts) split by volume, 2009 to 2013 • Top five exit sectors, 2013 • Top five US-sponsored buyouts by target countries and target sectors in Europe, 2013 • European exits, 2009 to 2013
The road to recovery: the UK private equity picture
• UK accounts for 26 percent of European buyout value in 2013, up three percent from 2011 • 10 private equity-backed IPOs on the London Stock Exchange in 2013 raised US$6.6 billion, compared to none in 2012 • Stable debt markets helped support new buyouts valued above £500 million • UK captured 37 percent of US-sponsored European buyout volume and 32 percent of value in 2013 • Strong deal flow is apparent across diverse range of sectors, though leisure sees notable rise, accounting for more than a fifth of UK buyout value in 2013
Changing US perspectives
While the crisis saw transatlantic activity flatten out, North America is once more seeing the potential in Europe
Smooth sailing: the Nordic private equity picture
• Nordics is the best performing private equity region through the crisis • Positive trends in acquisition financing as local arrangers in the Nordics fund deals • IPO window wide open • Exit volumes in 2012 and 2013 more than double level recorded in 2009 • Pharma accounts for 35 percent of exit value, followed by TMT (27 percent); consumer and industrials account for 12 percent each • Nordic funds see strongest returns in Europe, with average five-year IRR of 13 percent • Foreign buyers account for three of the ten biggest deals and more than half of all Nordic buyouts in 2013 • Increasing interest in secured and unsecured high-yield bond financing
Defying the odds
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