Private equity activity surges in 2017
Private Equity deal volume across Europe has continued to grow, reaching its highest level in four years. The number of platform investments made by financial sponsors has seen an annual increase of 29%. A total of 824 businesses were backed by PE funds in 2017 compared with 638 in the previous year.
Volume is not the only metric that grew in 2017 -multiples paid by PE also saw an increase during the year, with an average acquisition multiple in 2017 of 10.4x compared to 10.2x in 2016. This rise was predominantly driven by prices paid in Q2 and Q3 of 2017. The average multiple in Q4 2017 coincided with the first quarter of the year and the average multiple across the last four years.
Key regions contributing to high deal volume in 2017 were UK/Eire, representing 25% of total deal volume, and France, accounting for 22% of total number of deals. The regions with the lowest PE activity in the year were Benelux, with 8% of total volume, and CEE, where only 4% of European PE deals were completed. The mix of volumes between geographies has remained relatively stable since 2016.
The Industrials and Chemicals sector saw the highest volume of deals in 2017, accounting for 26% of European deals. This trend was particularly noticeable in France where 62 businesses in the sector were backed by PE.
The other two most active sectors were TMT and Consumer, each representing 18% of total PE deal volume.
Regional average annual multiples
The growth in prices across Europe was mainly driven by the DACH and Nordic regions, where average multiples increased by 0.8 to 10.5x, and by 0.4 to 11.0x respectively.
The CEE region has seen the highest annual growth in average multiple, a difference of 1.6 to 12.1x. However due to the region’s low deal volume this had limited impact on overall average price across Europe.
Multiples in the UK/Eire and France regions were stable between 2016 and 2017. UK/Eire average dropped by only 0.1 to 10.3x, while French businesses were acquired by PE at the same average price as in 2016.