Q3 Barometer: M&A softens across entire PE spectrum

Unquote team
14 November 2022

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European PE activity softened in Q3, with buyout and growth deals trending down alongside early-stage, which had already begun to slow in the second quarter amid a wider risk-off pivot in capital markets, according to the Unquote Private Equity Barometer, produced in association with abrdn.

Click here to download the full Q3 Private Equity Barometer

After moving up in Q2, total deal value across all areas of PE declined by 47% to EUR 55.8bn, the lowest point since 3Q20, when the world was emerging from the initial round of COVID-19 lockdowns. This recent weakness in value terms was led by a lack of large buyouts, which make an outsized contribution.

"Interestingly we still see the highest quality assets trading at strong prices particularly in the buyout space, reflecting the one-off nature of investing in PE and buyers' continued appetite for perceived safe havens for capital," Alistair Watson, head of strategy innovation at abrdn private equity, said in the report.

Total buyout value came to EUR 44.6bn in Q3, again the lowest ebb since the corresponding quarter in 2020 and a 48% quarter-on-quarter decline. Volume fell by 27% to 211 buyouts, a low not seen since 2Q20 at the start of the pandemic.

Growth capital volume was down 34% in Q3 to 266 deals, less than half of the total in the first quarter of the year. Growth deal value totalled EUR 10.7bn in the third quarter, a 43% shortfall on Q2.

"Inflationary pressures and ongoing restrictive monetary measures have been aggravated by the war in Ukraine and its impact on energy supplies, business input costs and consumer discretionary budgets," Watson wrote. "Europe is almost certainly entering recession and this economic deceleration is showing in private capital markets."