Taking stock of 2018: a year of contrasts

Taking stock of investment activity and fundraising levels over the previous 12 months is a time-honoured holiday tradition at Unquote. On the face of it, 2018 should be seen as a good vintage for European private equity – not as strong as 2017 perhaps, but certainly impressive from a deployment perspective.

With a week or so left in the year, and with our researchers still crunching the numbers, buyout activity is nearly on par with 2017 volume-wise, meaning well in excess of any post-crisis year prior to that, by some margin. As for aggregate value, at a current €174bn, it is already ahead of the 2017 total.

Meanwhile, the number of fund closes by European private equity firms and their aggregate commitments have slowed down during 2018, after the breathless pace set over the previous couple of years. Assuming there are no late-December bumper fundraises, Unquote Data indicates that European funds will have raised around €92bn – a much lower figure compared with both 2017 and 2016, and spread out across far fewer funds too.

One could interpret this as appetite for European private equity cooling. However, as participants in our annual roundtable rightly indicated, the best managers still have no trouble attracting larger tickets from LPs, and the sheer scale of the 2016-2017 fundraising bonanza means there is still a staggering amount of institutional capital to be deployed in European assets in the next five years.

This presents a different challenge, though: the availability of top-shelf investment opportunities will have to remain high in order to deploy this dry powder without pushing prices beyond their already aggressive current levels. The next 12 months should be eye-opening in that regard, not only in terms of assessing whether the industry is indeed entering a new phase of the fundraising cycle rather than experiencing a temporary blip, but also with regard to whether dealflow continues to rise and offer an outlet for private equity's deep pockets.

Of course, a key unknown in this equation – and the most evident source of uncertainty in the shorter term – will remain what happens in March in the UK, which has historically driven European private equity activity to a large extent. The drop-off in fundraising has been far more severe there compared with Europe as a whole and activity levels have fallen sharply since September.

The coming year could be pivotal in setting the parameters of the private equity landscape for the next cycle, and the Unquote team will remain dedicated to offering you in-depth analysis of all these developments across Europe. In the meantime, I would like to thank you for your continued support and wish you an excellent holiday break.

The Unquote team will be back on 3 January. In the meantime, we have rounded up a selection of must-read stories below, to make sure you are up to speed on all the latest developments before starting 2019

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