General partners in Europe, the Middle East and Africa spent less and completed fewer entry transactions last year amid soaring deal prices, according to research from S&P Global Market Intelligence.
The firm’s latest EMEA Private Equity Market Snapshot found that EMEA-based GPs deployed €19.2 billion through 857 entry transactions in the first quarter of this year, down from €37 billion across 913 such deals from the same period in 2017. Europe had the largest drop in aggregate entry values, with spending falling more than threefold
Appetite for US entry transactions doubled to €4.6 billion.
The decline in spending was accompanied by increases in average entry deal sizes across all regions globally. Africa and the Middle East led the charge, with entry sizes for EMEA GPs more than doubling in each region to €128.5 million and €27.9 million respectively.
Soaring prices have prompted some GPs to sit on the sidelines rather than overpay for assets, according to Bain & Company’s Global Private Equity Report 2018. This has prompted fears among some LPs that their capital is not being put to work fast enough.
“We’re noticing the slow down already – investment pace is slightly behind our expectations,” one European pension manager told Private Equity International in March, noting that an inability to deploy capital could prompt some managers to alter their investment strategy.
“We’re having conversations with our managers about looking at complex transactions to keep entry multiples at the correct levels. They need to find less-well performing companies to be able to pay below 10x entry multiples.”