SEATTLE, July 16, 2020 /PRNewswire/ -- PitchBook, the premier data provider for the private and public equity markets, today released its Q2 2020 European Private Equity Breakdown, which found European private equity (PE) deals and fundraising sharply declined through the first half of the year. As the COVID-19 crisis unfolded, lenders concentrated on existing loans, sellers tabled exit plans amid the volatility and most GPs either paused or outright cancelled transactions as portfolio triage took precedent. Deal count and value plunged to the lowest quarterly figures since Q3 2013 and Q4 2016, with the UK & Ireland recording the largest year-over-year decline in deal volume. Exit value in Q2 saw an uptick from Q2 2019, propelled by the largest European IPO in nearly a decade, but is still on track to set a six-year low for annual exit value. On the whole, we expect exit activity to remain tepid through the second half of 2020. Capital raised in Q2 was subdued, with a new annual low expected for fund counts. LPs evaluating the denominator effect, liquidity schedules and allocation targets substantially contributed to the lackluster fundraising amounts, while less experienced GPs paused on launching new funds amid the volatility. That being said, LPs recognize 2020 vintages have the potential to produce top-tier metrics in this no-interest-rate environment, due to lower multiples, less competition and an expanded opportunity set. As a result, brand-name European managers will grow their LP wallet share during the downturn.

"With the virus more contained in Europe compared to other regions and the continent reopening, we believe deal activity will gradually pick up in the coming quarters as managers seek to deploy their record €237.2 billion in dry powder aggressively but wisely," said Dominick Mondesir, EMEA Private Capital Analyst at PitchBook. "We anticipate more established managers will find opportunities to invest in discounted assets that are cyclically but not secularly under pressure."

To download the report and underlying data, click here.

Investment Activity

• European PE deal activity slowed considerably in Q2 2020 to €79.8 billion across 650 deals, a year-over-year decline of 18.7% and 31.5%, respectively.
• Median deal size fell to €25.0 million in the first half of the year after record highs in 2019, driven by a lack of activity in the upper end of the market. Only two transactions sized between €1 billion and €2.5 billion closed in Q2, collectively worth €3.3 billion.
• Bolt-ons as a percentage of buyout volume stand at 61.2% through H1 2020 and are apace for a record year. The largest bolt-on in Q2 2020 was Italy-based Dedalus' €975.0 million acquisition of Afga-Gevaert healthcare information technology business.
• Although PE deal volume declined across every European region, the UK & Ireland attributed the largest drop at 62.3%. Both the severity and length of the region's COVID-19 outbreak and a no-deal Brexit contributed to sponsors' hesitancy to invest.

Exits

• Exit value in the first half of the year puts 2020 on pace for its lowest annual total in six years. However, the €55.2 billion worth of liquidity events in Q2 2020 – largely propelled by JDE Peets' outsized IPO – represented a 4.9% increase over the same quarter last year.
• In Europe's largest IPO listing since 2011, JDE Peets' raised €2.3 billion at a pre-money valuation of €14.9 billion. This offering in part pushed the year's median IPO size to €722.6 million, up from €186 million in 2019.
• The number of exits closed in Q2 declined 44.6% from 2019. Of the 122 exits, only five were over €1.0 billion compared to 10 this time last year.
• The lower end of the market (exits sized between €25 million-€100 million) was disproportionately affected by the pandemic, with exit volume falling nearly 90% year-over-year.

Fundraising

• European PE fundraising has been extremely subdued through the first half of the year, with only €19.6 billion raised across 38 vehicles – on pace to hit a new annual fund count low.
• No funds closed above €2.5 billion in H1 2020, which significantly contributed to the lackluster fundraising total, as LPs reviewed portfolios and evaluated the denominator effect, liquidity schedules, and allocation targets. COVID-19 has disproportionately affected the fundraising trail for first-time GPs, spinout GPs, and those without a solid track record.
• With a number of European brand-name mega-funds in the market, we anticipate capital raised will increase considerably in the coming quarters. While not included in our Q2 datasets, CVC Capital Partners recently closed on €21.3 billion in Europe's largest-ever buyout fund.
• At the halfway point in 2020, buyout funds have dominated the fundraising market, accounting for an 81.2% share with €15.9 billion in capital raised. Growth equity funds have also been gaining considerable traction, contributing around 20% of the year's total commitments.

Additional coverage in this report includes:

• Introduction
• Overview
• Deals by size and sector
• Spotlight: France & Benelux
• Exits
• Fundraising

Download the full report here.

About PitchBook
PitchBook is a financial data and software company that provides transparency into the capital markets to help professionals discover and execute opportunities with confidence and efficiency. PitchBook collects and analyzes detailed data on the entire venture capital, private equity and M&A landscape—including public and private companies, investors, funds, investments, exits and people. The company's data and analysis are available through the PitchBook Platform, industry news and in-depth reports. Founded in 2007, PitchBook has offices in Seattle, San Francisco, New York and London and serves more than 45,000 professionals around the world. In 2016, Morningstar acquired PitchBook, which now operates as an independent subsidiary.

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SOURCE PitchBook