European PE exits back to historic highs in Q1

Unquote recorded 286 exits of European private equity portfolio companies in the first three months of 2021, valued at an estimated aggregate of €75.05bn. While a little shy of Q4 2020's 302 divestments, this makes Q1 2021 the busiest first quarter for exits in volume terms since Q1 2013; it is also the third busiest quarter since 2019, and compares very favourably with the 254 exits recorded per quarter on average across 2016-2018.

The spike in aggregate value was facilitated by a sharp rebound in listings of PE-backed assets at the start of 2021, including several multi-billion flotations for the likes of Auto1, InPost and Dr Martens. In fact, IPOs of PE-backed assets were at their highest in years in the first quarter, with Unquote Data recording 11 such exits.

But buoyed by an equally bullish sentiment on the buy-side for PE, as reported, Q1 also saw a sharp increase in secondary buyout activity, with 91 deals matching the record set in Q2 2018, and the estimated overall value of €28.7bn comfortably exceeding all quarterly totals on record.

Sizeable SBOs in Q1 2021 – also noticeably boosting the record aggregate value of exits in the quarter – included EQT entering exclusive negotiations to acquire France-based medical diagnostics business Cerba HealthCare from Partners Group for €4.5bn, CVC wholly acquiring Danish heavy building materials distributor Stark Group from Lone Star Funds for around €2.5bn, and Charterhouse selling French pharma Cooper Consumer Health to CVC for €2.2bn.

PE divestments were comparatively worse affected by the Covid-19 outbreak last year than incoming investments: the volume of exits by private equity players across Europe fell by 43% year-on-year in Q2 2020 as the coronavirus crisis took hold, as reported at the time. As GPs opted to play it safe and wait for greater visibility on portfolio performance and more post-outbreak comparables to be tempted to launch processes, exit activity also rebounded later than buyout activity, with divestments only starting to accelerate in Q4, whereas incoming investment activity was already healthier by the summer.

While full April figures are not yet available, the fact that the vast majority of Q1's strong exit volume is attributable to March's 127 transactions – making it the second busiest month for exits in the past five years – could indicate that momentum is building up as Europe is starting to contemplate a post-Covid future. That said, it is also likely that a sizeable portion of March's exit activity in the UK (which accounted for a significant portion of the European total) was spurred by a rush to get deals across the line before a mooted hike in capital gains tax rates in the country that month, which ultimately did not come to pass.

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