Q3 Barometer: Market pauses for breath

unquote" and SL Capital
01 November 2017

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European deal volume remains at high levels, despite a fall in the third quarter, according to the latest unquoteт Private Equity Barometer, published in association with SL Capital Partners

The European private equity market cooled in Q3, which is perhaps not surprising after an especially active Q2. Despite the slowdown, both deal volumes and values in most segments of the market remain at historically elevated levels.

There were 428 deals registered in Q3, down 13% compared with Q2, but still marginally higher than in Q1. The quarter continues a run of robust performance in the private equity market since the start of the year, after two years of steady decline. Meanwhile, total deal value came in at €40.7bn, down 9.7% compared with Q2, which was the highest quarterly value for a decade.

Deal numbers decreased in the buyout, growth capital and early-stage segments in Q3. The number of buyouts fell slightly from a 10-year high of 200 down to 195, while growth capital deal volume dropped to 170 from 201, which is still higher than in Q1. Early-stage dealflow slowed, as deal volume declined from 75 to 63.

Aggregate deal value contracted across all three segments. Buyout values edged down to €35.8bn from €37.6bn, growth capital to €4.4bn from €7bn and early-stage to €460m from €480m. Early-stage and expansion deal value is in line with their respective averages over the previous 10 quarters, while total buyout value remains above average.

Deal volumes fell in all buyout value ranges. There were 140 small-cap deals, down from 151 in Q2, which was the most active quarter since 2008. The number of mid- and large-cap buyouts also weakened slightly.

In the large-cap segment, deal value increased to €13.8bn from €13.3bn, with values declining in the mid- and small-cap range. Despite the falls, values in the small- and mid-cap range were greater than in Q4 2016 and Q1 2017.

Looking at all segments and deal types, the strongest region was the UK, where the total number of deals climbed to 141 – the highest since Q1 2015 – while deal volume declined in all other regions, with the sharpest fall in France – although this may have been due to a slowdown after Q2, its busiest quarter since 2011. UK deal value was also the highest of any region at €17.1bn, more than double its Q2 amount. The DACH countries had a strong quarter in value terms, with €10.2bn in capital and debt spent on deals, up from €6.4bn.

Click here to download the full report, including detailed commentary and statistics for the growth capital and venture capital markets, as well as regional breakdowns.