A resilient and adaptable European mid-market is poised for a gradual recovery
Q4 2023 marked the highest number of insolvencies in a quarter since the pandemic, as the mid-market faced high debt costs, weak economic growth and rising energy prices. At the same time, the volume of private equity exits was the lowest in over a decade, resulting in a build-up of investments within portfolios, driving funds to seek alternative exit paths and deferring asset sales until more favorable market conditions and improved valuations emerge.
We believe a lack of distributions has led to a rise in continuation fund processes across the market, allowing sponsors to hold onto star assets for longer with the aim of prolonging value creation, as well as generating liquidity from underperforming portfolios.
The European private equity market has demonstrated resilience and adaptability, and it is poised for a gradual recovery, driven by strategic investments, resilient sectors, pointing to a potential rebound in M&A activity over the course of 2024.
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Read the regional commentary below
Benelux
“Trade buyers inbounding continue to be an attractive route for sellers where a formal auction process can be avoided”
Central and Eastern Europe (CEE)
“Private equity investors in the CEE region, notably in Poland, should monitor evolving debt dynamics, capitalize on emerging opportunities in restructuring, and align their strategies with the government's emphasis on sectors receiving EU funding”
France
“The outlook for 2024 suggests a more subdued environment, where strategic investments will likely dominate the market”
Germany
“Dry powder reserves, coupled with infrastructure demand and corporate carve-outs, set the stage for increased dealmaking”
Ireland
“The Irish economy continues to perform strongly, with expectations it will record growth throughout 2024 and into 2025, providing attractive conditions for deal flow in the country and a strong outlook for M&A”
Italy
“In the network and software subsectors, we have seen vibrant levels of M&A activity as a result of the ongoing digital transformation, accelerated by AI adoption and the incremental requirements for the transition to 5G”
Spain
"The M&A outlook for 2024 is cautious optimism that the market can stabilize and reactivate”
UK
“The appetite for alternative exit routes in the mid-market has continued to fuel the demand for secondaries amongst sponsors”
Cross-border opportunities in Japan
“The surge of assets entering the market, combined with pressure to optimize business performance provides a rich opportunity for private equity firms in Japan”
Cross-border opportunities in China
“We expect a gradual recovery of Chinese investment in Europe as global economic and political tensions ease”
Secondaries
“We believe secondary solutions are demonstrating resilience in all market conditions as the adoption of GP-led solutions continues to expand with the gradual thawing of the M&A market. Sponsors are, in our view, increasingly turning to GP-led solutions to provide liquidity options to LPs and retain exposure to their most promising assets”
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