Private equity barometer | Q2 2022

abrdn.comIn EU/EEA for Professional Investors, in Switzerland for Qualified Investors - not authorised for distribution to retail investors in these regionsPrivate equity barometerQ2 2022 figures based on preliminary data from Unquote, Europe’s specialist private equity information provider Introduction 3Key findings 4Values up and volumes down as volatility takes 5 hold in European PE in Q2 2022Overall European PE 6Quarterly focus 7Buyouts 8Growth capital 12Early-stage 14Contents2Q2 2022 Preliminary Data Executive summaryBifurcation sets inEuropean private equity (PE) activity bifurcated in Q2 2022, with deal value reaching one of the highest levels on Unquote record and volume sinking to its lowest in at least four years. This is a consequence of a significant slowdown in venture capital (VC) activity as new macroeconomic and market dynamics emerge, with VC sitting further out along the risk curve. Given that start-up deals tend to be small, this has had a disproportionate impact on PE deal volume but minimal effect on overall value. This divergence may narrow in the year ahead as interest rates and the cost of financing in Europe rise. For the first time in 11 years, the European Central Bank has raised its base rate, by 50bps, with further tightening likely in September as the need to temper inflation outweighs growth concerns. Buyout funds rely more heavily on debt financing to back their transactions and so tighter credit conditions have the potential to dampen their larger-cap deals, though this remains to be seen. Karin Hyland Senior Investment Director, abrdn Private EquityQ2 2022 Preliminary Data3 Overall European PE .European PE deal value was up by nearly 10% in Q2 2022 to EUR 102.6bn, the highest level of activity since Q3 2021. .At the same time, PE deal volume fell to a four-year low of 720 deals in Q2 2022, down 23% on Q1. .As value has risen and volume has fallen, the average deal size was up to EUR 142.5m – the highest figure since 2018 and 43% up on Q1 2022. Buyouts .Aggregate European buyout value surged to EUR 83.2bn in Q2, up by a full 27% on Q1 and the highest level in at least four years. .This came despite volume easing off by 8% to 280 buyouts in the same period. .The average buyout deal value in Q2 2022 soared to EUR 297.2m, up 28% on the previous quarter and a new high watermark. .The value of large-cap buyouts (those worth more than EUR 1bn) surged to EUR 47.6bn, well ahead of any other category and 37% above the trailing average through to the beginning of 2018. .The UK & Ireland and France were neck and neck, with both markets counting 57 buyouts in Q2. .The UK & Ireland overshadowed every other market by a factor of more than two (measured by value), with EUR 28.2bn recorded. .Over a third of this value came from a single transaction: the EUR 10.8bn buyout of Access Group by GIC, TA Associates and HgCapital. Growth capital .Growth capital deals fell by 27% in Q2 to 377 transactions versus 515 in Q1. .Total growth deal value took a similar turn, falling by 24% to EUR 18.2bn. While this represents the lowest figure since Q4 2020, it is still well above pre-pandemic levels. .The UK & Ireland was the most active region for growth capital deals, with a total of 113, putting it well ahead of France’s 74. .The DACH region was in third place with 55 transactions, its volume more than halving, quarter-on-quarter. .The UK & Ireland also came out on top in value terms, claiming EUR 4.8bn in growth deals, while France and DACH followed close behind with EUR 4.1bn and EUR 3.8bn, respectively. .The largest growth capital deal in Q2 was a EUR 1.5bn investment in Ligue de Football Professionnel, the media business of French football league Ligue 1, by CVC Capital Partners. Early-stage .The 63 early-stage deals recorded in Q2 represents a 46% drop on the previous quarter, as VCs sat on the sidelines. .Deal value was also down by as much as 70% to EUR 1.2bn in Q2 – though Q1 was an outlier, and the second quarter is broadly in line with the pre-pandemic average. .Yet again, the UK & Ireland led the way, with 29 early-stage deals, nearly three times the Nordics’ tally and a shift away from DACH’s typically dominant early-stage industry. .The UK & Ireland similarly claimed the highest share of early-stage deal value in Q2 (EUR 409.7m), playing host to the largest deal in Europe. .This top funding round was worth EUR 99.9m and saw Equitix back Freedom Fibre, a wholesale fibre network operator that was formed little over a year ago. Key findings Source: Unquote Data (14 July 2022)4Q2 2022 Preliminary Data Values up and volumes down as volatility takes hold in European PE in Q2 2022 5Q2 2022 Preliminary Data Overall European PE European PE has lost some momentum, despite funds targeting larger-cap deals remaining very active. In Q2, deal value reached EUR 102.6bn, a 10% gain on the previous quarter and one of the largest increases seen in years. This outperformance belies a s