2018 in Europe: Brexit begins to bite

The UK is no longer the most active private equity market in Europe and some of the country's firms met a cool reception on the fundraising trail.

To call 2018 an eventful year for Europe would be an understatement; Brexit has left the UK government in turmoil, France is aflame with civil unrest and Russia is sabre-rattling to the east.

European private equity has generated some dramatic headlines of its own. With the help of industry experts, Private Equity International looks back at some of the biggest trends that shaped the asset class this year.

Survival of the fittest

A broadly benign market was not kind to everyone.

Mid-market investor Lyceum Capital Partners cancelled a £375 million ($475 million; €416 million) fundraise for its fourth fund in January and pivoted to deal-by-deal, citing a diminished appetite for UK private equity following the EU referendum, among other factors. The firm – which shed seven partners after the move – has since relaunched with capital to invest as Horizon Capital.

Dick Hanson, a pioneer of European private equity, called time on DH Private Equity Partners last month after three decades in the asset class. The firm, previously known as Doughty Hanson after its two founders, will be wound down and its remaining investments realised after failing to get its new fund – launched with a €1 billion target in May last year – off the ground.

Fellow UK buyout firm Terra Firma Capital Partners, meanwhile, has seen its fundraise hit the skids after LPs asked to see a demonstrable track record from its deal-by-deal activity before committing to a blind-pool vehicle.


If 2017 was the year of expanding into new asset classes, 2018 was the year European firms launched or raised funds targeting different segments and stake sizes.

“It’s a conversation we have in pretty much every GP interaction, so it’s definitely on most GPs’ agendas,” Kristina Widegren, principal at European placement agent Rede Partners, told PEI.

Northern Europe-focused Triton held a final close on €448 million for Triton Smaller Mid-Cap Fund I in July, above its €400 million hard-cap. The move enables the firm to acquire businesses it had originally targeted with earlier vintages, but that no longer meet the size requirements of its flagship funds.

“Typically this fund competes with local single-country funds, rather than pan-Europeans, and valuations are lower,” said Andi Klein, who sits on the TSM investment advisory committee. “The gap has narrowed, but it’s still significant.”

London’s Permira Advisers gathered $1.3 billion through a first close for its debut growth fund, which has a $2 billion target, in May. IK Investment Partners, also UK-based, is seeking an unknown amount for IK Minority Partnerships I.

HgCapital upped its target size by raising £1.5 billion for its debut large-cap fund in March. Saturn I targets European software companies with enterprise values above £1 billion.

The market is becoming more accepting of such a move, Widegren added. “You still have some LPs who feel very strongly about being a single-strategy firm, but it’s becoming a smaller group. It’s beneficial for both parties: if they can’t get the ticket size they’d like in a flagship fund it allows them to allocate to a GP they like in more than one way.”

Changing of the guard

The value of private equity buyouts in continental Europe rose 15 percent year-on-year to €79.3 billion across 523 deals in 2018, the highest annual figure since 2007, according to CMBOR research sponsored by Equistone Partners Europe and Investec.

The Netherlands claimed the top spot with €23.5 billion of investment this year. The country was home to four of the 10 largest buyouts, including Carlyle Group’s acquisition of AzkoNobel Specialty Chemicals and KKR’s investment into food producer Upfield.

UK spending dropped by one-third to €21.4 billion, the first time since 2011 that it has not been in pole position. Silver Lake’s purchase of Zoopla was the UK’s only representation in the top-10 largest buyouts, having previously accounted for eight places in the previous three years’ rankings.

France is also nipping at the UK’s heels, with spending by private equity firms climbing 35 percent to €20.1 billion.

A glut of European deals is unsurprising given that firms raised $50 billion for the region in the first three quarters of 2018, according to PEI research. These sums have prompted concerns over whether the pace of European deployment is sustainable.

“We’ve seen some GPs raise funds probably earlier than they should have done and waiting up to a year before making the first investment,” said Rhonda Ryan, head of EMEA at LP advisory firm Pavilion.