As featured on Sky News
The European market has been slower. In Q1 2023 there were 3,969 completed transactions and in Q1 2024 there were 3,055 – a 23% year-on-year decline.[i]
Perception vs reality
If you ask most people in the private equity market, it is likely they would say; “things are looking up, we are busier”, and yet the number of new buyouts completed in Europe in Q1 2024 was the lowest reported quarterly number since Q3 2020 – the depths of the Covid crisis.
At 467 deals, the volume is 13% below Q4, and 9% below the same quarter last year.
Buyouts and bolt-ons
The same is not true for bolt-ons for existing private equity owned businesses. 55% of all deals completed by private equity were bolt-ons – some 560 deals.
This is the highest percentage on record and is part of a clear and long-term trend. In 2019 c.30% of private equity deals were bolt-ons. By 2022 it was over 40% and through 2023 it touched 50%. So, it is clear that much of the “we are busier” observations from private equity are true – but the focus has been more on bolt-ons than new buyouts.
Figure 2: Q1 private equity buyouts (%)
Source: Mergermarket (see Appendix*)
Figure 3: Q1 private equity bolt-ons (%)
Source: Mergermarket (see Appendix*)
M&A as a driver of value
In a market where the appetite for risk remains low, bolt-ons often deliver lower risk returns. The investor knows the business and the industry and has confidence in a management team and platform. Revenue and cost synergies can underwrite earnings growth and there is often a multiple arbitrage opportunity on exit – lower risk and higher returns.
With an existing investee company, private equity can evaluate opportunities in the same way that trade investors can. And as consummate deal-doers, this group of investors can deliver compelling value for vendors.
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Appendix
DC Advisory has prepared this material solely for informational purposes and it is not a research report. This material does not constitute or form part of, and should not be construed as, an offer to sell, or a solicitation of any offer to buy, or any recommendation with respect to, any securities. For other important information, please read our Insights & Publications disclaimer >
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Mergermarket search criteria for chart and graph data* |
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Figure 2
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Dataset for each time frame outlined, comprises private equity buyout volumes with deal values GBP 75 M and above, including those with undisclosed values, across all sectors in Europe |
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Figure 3 |
Dataset for each time frame outlined, comprises private equity bolt-on volumes with deal values GBP 75 M and above, including those with undisclosed values, across all sectors in Europe |
Sources
[i] Mergermarket: Total deal activity in Europe - All transactions in Europe between 1-Jan-19 to 30-Apr-24 with deal values GBP 75 M and above
