European highlights:
- Strong feelings of uncertainty and fears of the future have restrained valuations in the private markets, and led to a weaker exit environment. As a result, lower cash distributions to investors eager to re-commit capital to private equity has led to a slowdown in PE fundraising activity this quarter
- However, current levels of dry powder have reached all-time highs (see chart 1), meaning that funds must continue to source deals and commit capital in a highly competitive market
- Notably, Q1 2019 is the first quarter over the last five years in which the proportion of transactions announced in TMT has overtaken Services (see charts 3 and 4). This is likely a reflection of the fact that Business Services and IT are increasingly converging to create new tech-enabled services, providing an opportunity for PE funds to consolidate these markets and build scale
- The rise in TMT deals as a proportion of total buyout transactions has been largely at the expense of Consumer, Leisure & Retail. The inflationary consequences of Brexit in the UK, historically Europe’s largest buyout market, has led to a retraction of consumer expenditure in Britain. As a result, there is a sense of caution among PE funds to invest in businesses which rely on discretionary spending or where barriers to entry are low
- Industrials continues to be the sector in which PE funds invest the most capital, at a fairly constant proportion of 28% of buyout volumes throughout the last five years. The proportion of Healthcare transactions announced also remains consistent with their five-year average, despite being more
