- Funds raise €59bn in H1, up 15% year-on-year, but investments decline by 11% compared to H2 2023, falling to €40bn
"Fundraising by France & Benelux funds remained resilient, largely in line with recent performance. At a lower level, DACH (Germany [D], Austria [A], and Switzerland [CH]) and Southern Europe fundraising was also solid. In contrast, funds raised by UK and Ireland private equity contracted sharply, illustrating the region’s role as a home for many pan-European managers, and the greater impact of global conditions."
- Strong sentiment for increased transaction activity, more than 2/3rd of GPs and LPs expect a growing number of transactions in the coming 12 months while dry powder is at record levels of €410bn
"Over half of GPs expect more secondary buyouts and investments compared to last year. In more challenging markets, GPs have turned to GP-led secondaries to generate liquidity and bring in new capital to invest in portfolio companies."
- Investment segments of high expected activity indicate a growing attractiveness for investing in Deeptech & AI, Defense and Business Services
"Renewable energy and life sciences and healthcare continue to top the list of most attractive sectors, with only modest change in their levels of absolute appeal to managers. At the same time, the attraction of transformative technology and innovative food production techniques are high on rankings, especially deep tech, which has moved up by more than 10 percentage points. Both deep tech and agribusinesses likely are driven by a growing technology content as well as opportunities to automate production processes. Business services is still a hot area as companies are increasingly becoming more reliant on managed services solutions of different sorts."
BRUSSELS--(BUSINESS WIRE)--Invest Europe, the association representing Europe’s private equity (PE), venture capital and infrastructure sectors, as well as their investors, and global management consultancy firm, Arthur D. Little (ADL) today published their 2024 pan-European Private Equity market sentiment report, alongside market activity data for the first half of 2024 published by Invest Europe.
While activities remain challenging, sentiment and activity amongst both GPs (General Partners/fund managers of PE firms) and LPs (Limited Partners of PE firms/fund investors) are increasingly positive. 83% of GPs expect fundraising to stay the same or increase over the next 12 months – compared to 50% a year ago. This optimism matches investor views - over 90% of LPs expect higher capital commitments to private equity over the next three years.
The fifth annual edition of Invest Europe and ADL’s survey gives a forward-looking view of expectations and priorities for the Private Equity industry and is based on interactions with more than 250 managers and investors. Its positive short- and medium-term outlook is reinforced by Invest Europe’s H1 data.
- Private equity and venture capital funds raised €59 billion in the first half of 2024, a 15% year-on-year increase, but down by 28% compared to the amount raised in the second half of 2023. Over the same period, private equity funds invested €40 billion in European companies, down €5 billion or 11% compared with H2 2023.
Advances in technology and the uncertain geopolitical landscape are directing where investments are being made. Deeptech & AI now heads the list of most attractive target sectors, favored by 68% of GPs, closely followed by defense a new entry in the list of sectors. Dual-use technologies that can serve both civilian and military applications are a particular focus. 24% and 26% of GPs and LPs respectively say they are more willing to consider investments in this area. Renewables have dropped from the top five choices for investment, while sectors linked to squeezed consumer spending and legacy industries (consumer goods & retail, automotive, industrial equipment, chemical and transport) make up the bottom five investment destinations.
Showing increasingly positive sentiment, GPs intend to intensify their focus on exits with 66% stating they expect to concentrate on it more in the next year than in the previous twelve months. As a result, 71% of managers see more exit transactions in the next year compared to the last 12 months, a sentiment echoed by 68% of LPs. Both groups also expect increased valuation levels for assets. A rising tide of exits is expected to lead directly to an improved investment environment.
In terms of strategy, operations and investments, GPs were previously focused on the risks and opportunities presented by ESG. This has been supplanted by AI, as an investment opportunity, a technology to deploy at portfolio companies, and as a way of differentiating their own operations and performance. A third of GPs see the use of AI as a differentiator and over 80% of all respondents expect it to impact their operations in the near future. The potential risks to businesses posed by AI are also high on the agenda with 69% of GPs expecting an increased focus on the technology in their due diligence assessments, behind cybersecurity, which around-three-quarters of GPs expect to influence future due diligence processes.
At the same time complying with sustainability-related regulations remains a key priority for the industry. For GPs, ESG has become a normal part of operations, although for LPs it is still seen as the most important factor for private equity in the near future, ranked top by 68% of respondents, in line with last year. 53% of LPs increasingly expect managers to register their funds as Article 8 or Article 9 under SFDR regulation, effectively meaning vehicles that have a strong focus on ESG objectives or position themselves as “impact” funds.
Jonas Fagerlund, Partner and responsible for Private Equity segment at Arthur D. Little says:
“Our report shows that an improving macro economic backdrop is beginning to have a positive impact on sentiment within the European private equity and venture capital industry. Stabilization in inflation and falling interest rates are feeding green shoots, as seen by modest increases in exits in the first half of 2024, backed up by the data from Invest Europe’s activity report. This positive trend is expected to accelerate along with fundraising and investment activity. However, volatility and uncertainty are never far away. Escalating conflict in the Middle East and the actions of the new US administration could have global implications - these risks are unpredictable but cannot be underestimated.”
Eric de Montgolfier, CEO of Invest Europe, commented:
“Private equity activity remained challenged in the first half, yet there are signs of green shoots. It is also clear that investors overwhelmingly support the asset class, and that both they and managers are more optimistic about the future. With record levels of dry powder, and a focus on AI, deeptech and other opportunities, private equity is well placed to help drive innovation, competitiveness and sovereignty in industries that make a real difference to European citizens.”
"European capital under management (CUM) stands at a record of more than €1 trillion with dry powder of €348 billion, spread across all regions (see Figure 9). Those reserves may be held until conditions become clearer and there is closer alignment between buyer and seller price expectations. However, they also mean a sizeable war chest for new near-term opportunities"
To read and download the report, click here.
About Invest Europe
Invest Europe is the association representing Europe’s private equity, venture capital and infrastructure sectors, as well as their investors. We have over 650 members, split roughly equally between private equity, venture capital and limited partners – with some 110 associate members representing advisers to our ecosystem. Those members are based in 57 countries, including 42 in Europe, and manage 60% of the European private equity and venture capital industry’s €1.15 trillion of assets under management. Businesses with private capital investment employ 10.9 million people across Europe, 5% of the region’s workforce.
About Arthur D. Little
Arthur D. Little has been at the forefront of innovation since 1886. We are an acknowledged thought leader in linking strategy, innovation and transformation in technology-intensive and converging industries. We navigate our clients through changing business ecosystems to uncover new growth opportunities. We enable our clients to build innovation capabilities and transform their organizations.
Our consultants have strong practical industry experience combined with excellent knowledge of key trends and dynamics. ADL is present in the most important business centers around the world. We are proud to serve most of the Fortune 1000 companies, in addition to other leading firms and public sector organizations.
For further information, please visit www.adlittle.com or www.adl.com.
