Fundraising by European private equity firms has hit a nine-year high in 2016, driven by a 70 percent increase in buyout fundraising and in particular by demand for upper mid-market funds of up to €1 billion, according to Invest Europe, the trade association for the European private equity industry.
The association said buyout funds raised €56.3 billion last year, compared with the €33.6 billion raised in 2015, an increase driven by demand for larger funds between €250 million and €1 billion, which raised twice as much as in 2015. The increase came despite a 9 percent decrease in the number of funds raised, which the association said “indicates a trend towards larger funds.”
“This data demonstrates high investor confidence in European private equity, in an otherwise low-yield global investment environment. All European economies are now growing and investors value the proven ability of European fund managers to find attractive investment opportunities across sectors and geographies,” Michael Collins, Invest Europe’s chief executive said.
Structural shifts in recent years should provide protection against any over-heating of the market, said a spokesperson for Invest Europe in an emailed statement: “Divestment levels are much higher than in previous peak periods, which allows LPs to reinvest distributions and sustainably fund their private equity allocations. While European company valuations have increased, they are still well below US levels. EV/EBITDA multiples held steady at 8.2x in Europe, according to Pitchbook 2016 data. And while a low interest rate environment means favourable financing terms, leverage ratios are generally lower than pre-crisis and the equity proportion higher.”
The venture space mirrored the private equity trend, with venture capital funds raising €6.4 billion, the highest amount since 2008, also supported by an increase in larger venture funds.
Pension funds accounted for 34 percent of all capital invested, around 10 percent more than in 2015.