Private Equity in EMEA: Big and bigger?
M&A saw record-breaking levels across the globe in 2021. And private equity (PE) activity – including in the EMEA region – has been similarly spectacular. Will it last?
The PE industry in particular is cash-rich and the largest players have been raking in new funds for deals. Private equity firms and limited partners have been drawn to the industry’s biggest names during the pandemic, an effect caused by remote fundraising and the difficulty of conducting due diligence on newer, less established PE managers. Globally, median fund sizes are at their highest point in a decade and during the first nine months of 2021 approximately half of all private capital raised was achieved by mega funds.
Some of these were US funds with global remits that are able to invest across EMEA, such as the US$24.4bn Hellman & Friedman Capital Partners VI, the largest fundraise of the year and among the top five PE funds ever raised. In Europe, Sweden’s EQT Partners managed to pull in US$18.5bn for its ninth flagship buyout fund. So, it’s safe to say that big is back.
How much? And for how long?
The number of PE buyouts in EMEA in 2021 rose by 56% yoy to 2,467 transactions, while their aggregate value more than doubled over the same period to €420.2bn. And four out of the top ten largest transactions of the year were PE buyouts.
PE activity in EMEA has been driven by some of the same factors as in other regions – interest rates and abundant liquidity, as well as compelling deal drivers like digitalization and the energy transition.
PE firms are estimated to have US$2.3tn in dry powder as of October 2021, according to S&P data. Moreover, dry powder is accumulating in the hands of the largest funds: the top 25 largest PE firms hold over half a trillion dollars in unallocated capital, according to S&P.
The hunt for assets
The wall of uninvested capital at PE’s disposal indicates that 2022 is primed for similarly outsized deals and carve-outs are likely to be numerous for some time. On the sell-side, European corporates are eager to bolster their capital positions and do so while valuations are still close to all-time highs. PE will be only too happy to oblige.
Although the PE industry is facing headwinds in the form of rate hikes, financing conditions are set to remain benign by historical standards, and with so much firepower at their disposal, PE firms will continue to hunt for assets aggressively and listed European firms will undoubtedly continue to draw their attention. Read more here.