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Strong year predicted for EU Private Equity Markets 2022
In the opinion of EU private equity managers, the outlook for the European PE markets in 2022 is generally positive, with the majority of deals within the healthcare and technology industries.  The main focus for investors is ESG, as consideration for sustainability continues to gain traction amongst PE experts.

Most attractive sectors
The most buoyant sectors which offer the most attractive investment opportunities for 2022 have been identified in Roland Berger’s report, ‘European Private Equity Outlook 2022’. Technology, software and media 85%; health and pharmaceuticals 77% and logistics (and other business services) is ranked at 65%. The reason that these sectors are at the forefront is due to their relatively resilience in the face of crisis, such as the invasion of Ukraine.

Recording break volume of deals
According to Pitchbook’s 2021 Annual European Private Equity Breakdown, 2022 is on course for a strong year. Although the forecast is cautiously optimistic, the number of deals (or value) is not expected to reach the levels seen in 2021. During this period, low yet historically strong fundraising saw PE investors riding a wave of record deals (€755bn across 7,200 deals) supported by high reserves of ‘dry powder’ and an equally robust debt market. 

Pitchbook confirmed that the volume of deals across the board, were particularly in the technology, healthcare and financials sectors. Drilling down further, bolt-on acquisitions were responsible for much of the value creation, accounting for blockbusting annual record of 65% of buyouts.

UK and Ireland
In 2021, the UK and Ireland were the best performing regions. Even taking into account the negative effects of Brexit, these regions managing to quadruple their deal values from one decade ago, doubling the volume and value of their pre-global financial crisis deals. Key takeaways from the report:

- UK & Ireland are still the dominant centres for private capital. The value of deals in these markets have more than quadrupled over a decade – despite Brexit.

- UK & Ireland also have the strongest exit market, due to a robust IPO market supported by public equity investment, with investors paying a premium for strongly performing private companies.

- Bolt-ons accounted for 65% of all buyouts in the region.

Regional predictions for 2022
The report singles out Spain and Portugal for the highest predicted rates of growth in 2022 (3.7%), closely followed by Scandinavia and Germany with respective predictions of 3.5% and 3.4%. Although Germany is expected to perform well, the level of growth is expected to be much lower than the 4.6% seen in 2021. The UK’s growth in 2022 is also expected to be significantly lower (1.8%) than 2021.

Small and mid-caps
Abingdon’s investment analysts foresee growth in 2022 as being dominated by small cap deals (with volumes lower than 100 million euros), with mid-cap (deals between 100 to 500 million euros) following closely behind.

Sustainable investments
Briefed touched upon above, ESG is becoming a central tenet of PE investment managers and such considerations are rapidly growing. An impressive 66% of private equity experts already accept that sustainable corporate governance is very important. This percentage is expected to rise to 80% over the next five years, as growing emphasis on brand reputation, environmental and social concerns boost the importance of the sustainable business model.

In conclusion, strong deal activity is predicted to continue throughout 2022 but the momentum will be slowed slightly due tighter ESG policies and the prospect of high long-term inflation. There is of course the continued threat of further Covid variants and the war in Ukraine affecting supply lines and labour. However, there is no immediate threat on the horizon for EU private equity transactions as a result of the war, except that companies with connections to Russia are no longer a valid option.

If you would like more information about EU private equity investments, contact Abingdon Global Investments at [email protected].