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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