Annual Buyout Review: European momentum likely to be hit hard

Unquote's latest Annual Buyout Review is now available to download for subscribers, offering in-depth statistical analysis of European buyout activity in 2019: click here to download the report, including full statistical breakdowns and fundraising analysis for all key European geographies.

European private equity enjoyed another standout year in 2019, and this was abundantly apparent when looking at activity in the buyout market. The 1,127 transactions recorded by Unquote were a new high-water mark, finally eclipsing the long-standing 2007 record.

It is mostly the sense of momentum that has been a key takeaway from the past couple of editions of the Annual Buyout Review: last year was the third consecutive 12-month period in which the 1,000-deal mark was passed, and the contrast with the 700 transactions recorded per year on average across the 2010-2015 period is striking. And while aggregate value finally halted its climb, it still remained above the €200bn mark, which was hitherto only reached in 2018 and the 2006-2007 boom years.

This momentum has been noticeable – and most welcome – outside the typical UK bellwether, too. France, Italy and Iberia in particular all reached record levels in dealflow. France has become the largest buyout market in Europe in volume terms, vindicating local players that have for years extolled the potential of a deep and mature business ecosystem. As for southern European countries, their continued rebound has hinted at a more attractive status among LPs, beyond opportunistic distressed plays.

The strong fundraising haul of 2019 should have also pointed at more to come, as GPs keep their foot on the gas to deploy a combined €112bn raised across 96 buyout vehicles targeting Europe last year.

But these statistics – as well as reactions and positive expectations from market participants from all over Europe – were compiled in early 2020, prior to the coronavirus pandemic sweeping through Europe and the US.

It is of course too early to precisely quantify the impact of such an unexpected and rapidly evolving situation, with official government advice on mitigation measures and their impact on business still varying across most countries. But there is widespread consensus that deal-making will be severely impacted for Q2 2020 at least, as travel restrictions and social distancing take their toll on processes and due diligence.

More importantly, the expected economic shock and the impact on portfolios across the board – beyond the immediate existential threat to many assets in the travel and leisure sectors – should all but guarantee that the activity peak recorded in 2019 is unlikely to be repeated this year.

It remains to be seen whether Europe's economies can overcome this challenge soon enough for GPs to resume sensibly deploying the vast amounts of capital allocated to private equity in recent months.

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