Private equity, investments slow in Q1

"Despite market volatility, this increase is not entirely unexpected: the macroeconomic environment had shown signs of stabilisation in the latter part of 2024, prior to President Trump's return to the White House. This favourable window likely facilitated the closing of deals initiated in Q4 2024," reads the PitchBook report, which also points out that available valuation data suggests significantly lower entry multiples than in 2024.

In the first quarter of 2025, there was a significant slowdown in delisting deals in Europe, with only seven deals completed for a total value of less than EUR 1 billion.

"Delisting transactions historically show an inverse correlation with stock market performance: higher equity capitalisation makes it more expensive for sponsors to acquire listed companies. Moreover, private equity funds are used to offering a 25%-40% premium over the market price to convince shareholders to approve the transaction,' reads the report, which continues: 'European equity markets have experienced a strong rebound since November 2024, making takeovers less attractive in the short term. However, it should be considered that there are always niches of undervalued stocks, which can offer targeted bargains even in bullish market environments. In addition, the introduction of new tariffs by the US has triggered a correction in the public markets: if this trend continues and valuations remain compressed, take-private could return to prominence later this year'.

The small number of deals in the quarter included that forAlliance Pharma, which was taken over by its major shareholder at a 44% premium to the stock market price. Despite this, the overall valuation of the deal was about half of the capitalisation achieved by the stock in 2022, at the peak of its performance.

A feature that is becoming more pronounced over the years is an increasing 'ageing' of portfolio companies held by funds: in the first quarter of 2025, the average holding period for a European PE fund company rose to 3.4 years, up from 2.4 years in 2019. The ratio of investments to exits continues to increase, standing at 2.6 times compared to 2.3 times in 2024, a sign that divestments are more complex, especially through IPOs.

The total value of exits in the first quarter of the year fell 18% quarter-on-quarter, while the number of deals fell 25.2%. "Although an expansion in assets under management (AUM) makes it physiological to increase investment transactions relative to exits, it is critical that this ratio remains sustainable to avoid tensions over returns and liquidity," write the PitchBook analysts, who continue, "Increased uncertainty - already evident in previous months - helped to further dampen disinvestment intentions by sponsors. Based on the sample collected during the quarter, exits closed at significantly lower multiples than in 2024, a sign that macro and geopolitical uncertainties are being incorporated into valuations."

On the fundraising front, after a record year in 2024, European private equity funds raised a total of EUR 23.7bn through 22 vehicles in the first quarter. The mid-market segment got off to a strong start, accounting for more than 40 per cent of total fundraising, thanks to follow-on funds from CVC Capital Partners, Oakley Capital, Ardian, ICG and Adelis Equity. US software buyout specialist Thoma Bravo closed its first dedicated European fund by raising EUR 1.8bn, less than two years after opening its London office.

More than a quarter of inflows were concentrated on growth and expansion funds, which made a comeback after being penalised by the rise in rates. Geographically, most of the funds closed in the quarter came from France (six funds) and the UK (nine funds). In addition, Ardian closed Europe's largest ever secondary fund in January, with a record €29 billion in inflows. The Old Continent is now home to both the largest buyout fund (CVC Capital Partners Fund IX) and the largest secondary fund ever.