Private Equity Activity in Europe Falls

As Brexit looms, private equity firms are doing fewer deals and raising less money in Europe, according to PitchBook.

Chris Ratcliffe/Bloomberg

Chris Ratcliffe/Bloomberg

Private equity activity in Europe has slowed ahead of Britain’s looming exit from the European Union next month, according to PitchBook.

The number of private equity deals and exits and funds raised in the region fell during 2018, the data tracker said in a report released Thursday. Deal values also declined.

“Brexit seems to be taking a measured toll on the United Kingdom, and Germany and France are at risk of entering a recession,” the firm said. “Brexit seems to be a lose-lose situation, at least from a financial markets perspective.”

Private equity firms seeking to exit deals may be under further pressure this year as the European economy appears to be slowing, which often deflates pricing, according to the report. Firms may forego sales to wait for a more “stable economic environment,” PitchBook said.

Private equity firms completed 3,208 deals in Europe in 2018, a 12.8 percent decrease from the year before, the report shows. Deal volume totaled €396.3 billion ($449.5 billion) last year, a 4.5 percent drop from 2017, the report shows.

Deal exits saw even larger drops in number and value in 2018.

Private equity firms exited 969 transactions last year, a 24.5 percent drop from 2017, according to the report. Exit valuations last year plunged 23 percent, to €216.2 billion, the lowest volume in five years, PitchBook data show.

Another reason for a lower number of exits is the decreasing activity in the initial public offering markets, according to the report. Instead of taking mature companies public, many buyout firms are selling to their peers.

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Fundraising levels are also falling in Europe. Sixty-seven funds were raised in 2018, down from 105 in 2017, the report said. While the total level of capital raised in 2018 fell to €66 billion, from €72.5 in 2017, the average fund size increased.

Firms are raising bigger funds to help compete for deals against “nontraditional” investors such as sovereign wealth funds and family offices, PitchBook said.