Deal Value and Market Dynamics 

In Q2, European PE deal value rose by 27.3%, rebounding from a recent low. The ECB’s rate cut in June and a global market rally since November 2023 boosted investor confidence, reflected in rising deal sizes. The cleantech sector, especially renewable energy, is having a record year with significant deals for Neoen, Terna Energy, and Atlantica Sustainable Infrastructure. 

Exit value surged 90.3% QoQ in Q2, driven by 23 mega-exits, including 10 IPOs, marking the best year for PE-backed IPOs since 2021. The market is shifting towards sellers, as seen in Hargreaves Lansdown’s acceptance of a PE offer from CVC Capital Partners. Median EV/EBITDA multiples increased to 12.1x from 10.2x in 2023. 

European PE fundraising is on track for another record year. Despite fewer new fund closures in Q2 following a record Q1, notable megafund closes included Partners Group Direct Equity V (€14.2 billion) and EQT Mid-Market Growth Partnership Fund (€1.5 billion). However, fundraising timelines have lengthened, with the median extending from 12.1 months in 2022 to 18.4 months in H1 2024. The largest fund close, EQT X (€22 billion), was delayed by six months to February 2024. Central banks’ shift towards monetary easing may alleviate these bottlenecks. 

In Q2, European PE deal value increased by 27.3%, recovering from a recent low. The ECB’s June rate cut of 25 basis points to 3.75% has boosted markets and valuations after nearly two years of rate hikes. While the Bank of England and the US Federal Reserve have not yet cut rates, this divergence may make European markets more attractive in the short term. 

As of Q2’s end, the S&P 500 is up 15.1%, STOXX Europe 600 up 7.1%, and FTSE 100 up 5.7%. The ECB’s pivot and improving European macroeconomic indicators could further enhance Europe’s dealmaking environment. A global market rally since November 2023 may lead to a reverse denominator effect, prompting LPs to increase private market commitments due to rising public equity values. This effect helps explain Europe’s resilient fundraising compared to other regions. 

Rising Deal Sizes in 2024 

In 2024, average and median PE deal sizes are increasing. Median deal value rose from €20 million, where it stood for three years, to €23 million by the end of Q2. Similarly, average deal value increased from €191.9 million in 2023 to €229.8 million by the end of Q2 2024. This suggests more dealmaking ahead, indicating that the worst may be over. 

The average deal size, between €100 million and €500 million, represents roughly 20% of deals and 42.6% of deal value. This category often includes add-on deals, which are growing as sponsors favor buy-and-build strategies, using smaller complementary acquisitions to enhance their initial large platforms. 

Cleantech Booms in H1 2024 

Cleantech in Europe is having a record year, with H1 PE deal value reaching €15.4 billion, making 2024 the third-best year for the sector. Major deals include Neoen’s €3.5 billion takeover by Brookfield, Terna Energy’s €2.4 billion acquisition, Atlantica Sustainable Infrastructure’s €2.4 billion deal, and OX2’s €1.4 billion buyout. These companies focus on renewable energy, contributing to the energy transition and meeting Paris Agreement targets. 

The International Energy Agency reported a 50% increase in global renewable capacity in 2023, with growth expected to continue. The renewables sector remains active, largely insulated from broader macroeconomic issues. Increased focus on ESG efforts is driving investor and policymaker attention, with inadequate ESG strategies potentially excluding managers from large LP mandates. 

Are Take-Privates Still Hot? 

Despite predictions of a slowdown, take-privates remain strong in Europe, with 18 deals worth €16.2 billion in H1 2024, similar to 2023. These deals accounted for 8.5% of total deal value. Notable examples include Darktrace’s €5.0 billion acquisition by Thoma Bravo. More take-privates are expected, especially in the UK due to London Stock Exchange issues, while French firms on the CAC 40 are less likely targets due to strong share price growth and a protectionist stance. 

Can European Megafunds Continue Growing? 

Yes; Europe’s lag behind North America could be an advantage. In 2023, Europe accounted for only 23.8% of global megafund capital raised, compared to North America’s 73.9%. North America has traditionally been more accommodating to PE, with pension funds like the Canadian Pension Plan (33% in private equity) and endowments like Yale (17.5% in private equity) having significant allocations to alternatives. In contrast, Norway’s sovereign wealth fund has no private equity allocation. 

As North America’s PE market matures, firms are increasingly looking to Europe for growth. Four of the 20 European megafunds closed in 2023 were by US firms, and North American LP commitments to European megafunds rose from 55.1% in 2021 to 75.2% in 2023. This growing interest suggests that the European megafund market will continue to expand as the gap with North America narrows. 

Can European Megafunds Continue Growing? 

Yes, but concentration in megafunds will decrease, similar to the US. The top five US megafunds account for 26.4% of capital raised, compared to 41.6% in Europe. As Europe’s PE market matures, the largest megafunds will likely represent a smaller share of total capital as more megafunds enter the market. 

Exits Bouncing Back 

Exit value rose 90.3% QoQ in Q2, signaling recovery after a Q1 trough. H1 2024 saw 23 mega-exits, including 10 IPOs, marking a rebound in the listing pipeline. Despite some postponed IPOs, the environment is shifting to a seller’s market, with increased EV/EBITDA multiples indicating recovery. 

CVC Capital Partners’ IPO Boosts Financial Services 

CVC Capital Partners’ April IPO on Euronext Amsterdam valued the firm at €15 billion. The IPO, delayed for two years, was oversubscribed and boosted European financial services exits to nearly €20 billion in H1 2024. This success reflects market recovery and increased investor interest, especially as the financial services sector consolidates amid economic volatility. 

Fundraising Overview: H1 2024 

Strong Megafund Activity 
H1 2024 is on track for a record year in European PE fundraising, following a strong Q1. Notable megafund closes in Q2 include Partners Group Direct Equity V (€14.2 billion), Bregal Unternehmerkapital IV (€2.7 billion), Latour Capital IV (€1.6 billion), and EQT Mid-Market Growth Partnership Fund (€1.5 billion). These funds are targeting diverse sectors, from technology to healthcare, with some funds like EQT’s doubling their initial targets. 

Longer Fundraising Timelines 
Despite rising capital, fundraising timelines have increased, from a median of 12.1 months in 2022 to 18.4 months by mid-2024. This is due to tighter capital availability, market volatility, and fewer exits. The EQT X fund, initially set for 2023, was delayed to early 2024. However, with central banks easing policies, fundraising bottlenecks are expected to ease in 2025. 

Nordic vs. Other Regions 
Nordic fundraising remains strong, with 13 funds closing and raising significantly more capital than in 2023. Notable raises include Altor Equity Partners (€3.0 billion) and Verdane (€1.0 billion). In contrast, France & Benelux has seen a decline, closing only 13 funds and raising less than 12% of 2023’s capital due to political uncertainties. 

Outlook for H2 2024 
While Q1 had record fund closes, H2 may not match those highs. However, with GPs already raising 75% of last year’s capital and improving macroeconomic conditions, 2024 is likely to remain a strong year for European fundraising.