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Steve Roberts
PE Leader Germany & EMEA at PwC Germany
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The European PE sector has bottomed out – the only way forward is up
The downward trend that gripped the European private equity (PE) industry in the second half of 2022 continued in 2023. The uncertain economic and geopolitical environment, persistently high interest rates and non-stop hikes as well as ongoing supply chain problems made themselves clearly felt: Only 3,594 transactions took place in total, twelve percent fewer than in the previous year. The total value of transactions in Europe fell even more sharply: by 32 percent to €259.8 billion (2022: €383.5 billion).
Since the second quarter of 2023, however, the cumulative transaction value has risen again from quarter to quarter showing a decisive upward trend of recovery. In the fourth quarter, it finally reached its highest level in a year and a half. The number of deals in 2023 was also significantly higher than before the start of the coronavirus pandemic; however, the average value per transaction is still lower.
These and more results can be found in the Private Equity Trend Report 2024, for which PwC surveyed 250 European private equity firms. You can find out more about the results below.
The study at a glance
DACH region: number of transactions falls, value rises again
A total of 540 transactions involving private equity took place in Germany, Austria and Switzerland in 2023 – 15 percent fewer than in the previous year. However, the value of all transactions rose by 15 percent to €50.7 billion. The transaction value in the DACH region in the fourth quarter of 2023 was the highest since the second quarter of 2022.
The trend towards fewer but larger transactions was particularly evident in buyouts: Although their number fell by twelve percent to 451, their value increased by eleven percent to a total of 31.4 billion euros.
This provides further evidence for the high quality assets in the DACH marketplace and that private equity investors found ways and means to finance even large transactions to be able to sign good deals, even in the absence of LBO financing from the banks.
Technology sector back in top position
In 2023, the TMT sector (technology, media and telecommunications) was once again by far the most important area of activity for the private equity industry – both in terms of the number of transactions and their value: a total of 2,221 deals with a total value of 86.7 billion euros took place. This sector therefore accounted for more than one in three transactions (35 percent); it was responsible for just under a third (32 percent) of the total value of all transactions.
The industrial and chemical sector, which replaced TMT as the long-standing leader in 2022, was in second place in terms of the number of transactions and transaction value in 2023. Almost one sixth of all transactions (15 percent) took place here, accounting for 20 percent of the total value. The business services sector ranked third in terms of the number of deals (13 percent, 824 deals), followed by industry & chemicals with 11 percent or 49.3 billion euros).
Germany in fourth place
The German market accounted for 13 percent of European private equity transactions in 2023. This put the country in fourth place after Scandinavia. The transactions with German participation had a total value of €50.6 billion (11 percent of the total value). This corresponds to sixth place.
Despite the current difficult economic environment, Germany remains a very important market for the private equity sector: almost two out of three respondents (65 percent) stated that the country would be the most attractive investment destination for them in the next five years – ahead of the United Kingdom, which once again recorded the most private equity transactions in Europe in 2023 together with Ireland.
FiberCop acquisition by KKR largest buyout
KKR's takeover of the Italian fibre optic network operator FiberCop was the largest buyout of 2023 with a transaction value of EUR 21.7 billion. In second place was the takeover of the Norwegian digital company Adevinta by Blackstone, Permira, General Atlantic and TCMI for EUR 14.1 billion. In third place was the takeover of the British pharmaceutical company Dechra by EQT Partners and Luxvina for 5.5 billion euros.
To the study
Private Equity Trend Report 2024
The PE sector is optimistic
PE companies are positive about the future: Overall, just over half of respondents (51 percent) expect their own company to invest more in 2024 than in the previous year. 48 percent expect a slight increase, while three percent want to invest significantly more. Only ten percent assume that they will invest less in 2023.
Moderate growth expected
The majority of PE specialists and managers surveyed consider their current investments to be financially sustainable: a good third (36 percent) expect them to be more profitable than the investments they made five to seven years ago. 50 percent consider them to be similarly profitable. Only 14 percent expect a lower return on investment.
Two out of three respondents also believe that the private equity market as a whole will develop positively – although here too, only four percent of respondents expect the situation to improve significantly. In line with this, 68 percent of respondents expect the global economy to grow less strongly in 2024.
Financing remains a challenge
A majority of respondents (56 percent) consider the persistently high cost of capital to be a challenge for their own company. Difficulties in securing financing in the first place (41 percent agreed) and supply chain problems (33 percent) also pose major challenges for them.
Further study results
- Sustainability is increasingly becoming a value driver
- Data Analytics are widely used
- Efficiency gains are a priority
Sustainability is increasingly becoming a value driver
Sustainability factors continue to gain in importance as value drivers in the industry: just under half (43 percent) of respondents reported that higher ESG requirements were the most important change in the expectations of their limited partners in 2023. 34 percent of shareholders also demanded more extensive reporting. Accordingly, 63 percent of respondents collect sustainability figures for all companies in their portfolio; 34 percent do so for most companies.
Data Analytics are widely used
Almost nine out of ten private equity companies (87 percent) now use data analytics technologies to fulfill due diligence obligations and to identify potential investment targets. For almost three quarters of respondents (73 percent), data analytics also represents a focus for the digital transformation of their own company or their portfolio companies.
Efficiency gains are a priority
In view of high financing costs, three out of ten respondents consider efficiency gains to be the most important factor in increasing their earnings. 71 percent also expect this factor to become even more important in the current year 2024. For almost three out of four respondents (73 percent), efficiency gains have already played a more important role in improving earnings in recent years.
“The economic and geopolitical environment remains challenging. However, the private equity industry in Europe appears to have the worst behind it – and is optimistic about the future. Private equity has once again proven its resilience and maturity and has found ways to counteract the consequences of inflation and geopolitical tension and find attractive assets and do deals, albeit not in the great style they did before.”
Steve Roberts,PE Leader Germany & EMEA bei PwC DeutschlandDownload study now
Private Equity Trend Report 2024
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The methodology
PwC surveyed 250 European partners and managing directors in private equity firms in the fourth quarter of 2023 and the first quarter of 2024, with each of the participating firms having at least 250 million euros in assets under management. Around 14 per cent of respondents come from Germany.
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