The European buyout market could exceed €200 billion this year, according to a new report, after a flourishing mid-market helped activity top €50 billion during the first three months of the year.
The Private Equity Barometer, produced by Unquote and UK buyout firm Candover, reveals that that €51.8 billion ($70.6 billion) of capital was invested in European private equity in Q1 – the second quarter in a row that deal value has topped €50 billion. This was driven partly by a surge of deal-making in the mid-market, which saw a 119 percent increase in deal value compared to the previous quarter.
Colin Buffin, managing director at Candover, said: “The European private equity market has had an exceptional first quarter and looks on course for another record breaking year which could easily exceed €200 billion of deals. Interestingly, the growth of the mid-market during the first quarter has been particularly significant, both in value and number terms, but longer term, larger buyouts will continue to be the main driver of growth.”
Total deal volume is the highest that it has been since 2001, with 12 deals thought to be worth more €1 billion. Buyouts accounted for the large part of the total deal value of the period, representing €48.1 billion of the total €51.8 billion.
Surprisingly, deal value in the mega buyout segment (deals of more than €1.65 billion) actually decreased by more than 60 percent from Q4 2006.
However, deal value in the mid-market segment (deals in the €160 million to €1.65 billion range) increased substantially, up 119 percent from the previous quarter. Deal volume also increased in this segment of the market, up 83 percent from Q4 2006.
The study also suggests that the growth capital market has revived, both in terms of deal volume and deal value. 123 expansion deals happened in Q1 2007, an increase of 48 percent from the previous quarter. The deal value of this segment was particularly impressive, representing an increase of 287 percent from Q4 2006.
Venture capital has also performed well during the last three months, with an 81 percent increase in deal volume, the highest since the dot com crash. Deal value in this segment has increased by 29 percent to €397 million – also the highest since the 2001 crash. The biggest venture investment of the period was the €50 million acquisition of French biotech company Novexel by 3i, Atlas Venture and Sofinnova Partners.
Deal value increased most in the region that includes Germany, Switzerland and Austria, up 43 percent from the previous quarter to €14.9 billion. This has been driven by individual mega buyouts like the €3.2 billion recent buyout of Austrian bank PAWAG PSK Bank. The deal was Austria’s first ever mega deal and its value is more than ten times the market’s annual average for the last five years.
Deal volume in Benelux increased by 162 percent from the previous quarter.