Private Equity Doubles Down on Portfolio Company Acquisitions, Defying European Buyout Slowdown

Private Equity Doubles Down on Portfolio Company Acquisitions, Defying European Buyout Slowdown

(IN BRIEF) According to data from CMBOR, Europe’s private equity industry has significantly increased its support for portfolio company buy-and-build acquisitions in the first half of 2023. With 369 acquisitions made, it marks the third-highest figure for H1 on record. While the broader European buyout market experienced a slowdown, private equity firms capitalized on disruptive macroeconomic forces, deploying capital and operational support to help portfolio companies expand market share. The trend of bolt-on deals, characterized by lower valuations, has remained robust, offering an opportunity for sponsor-backed companies to consolidate and grow.

(PRESS RELEASE) LONDON, 19-Jul-2023 — /EuropaWire/ — Europe’s private equity industry doubled down on supporting portfolio company buy-and-build acquisitions in the first six months of 2023, according to half-yearly data on bolt-on transactions from CMBOR, the Centre for Private Equity and MBO Research based at Nottingham University Business School and supported by Equistone Partners Europe.

• The 369 acquisitions made by private equity portfolio companies in H1 2023 is the third highest H1 figure on record
• The post-pandemic trend of sponsor-backed companies making more acquisitions at lower valuations holds firm
• This robust performance stands in marked contrast to the European buyout market more broadly, which witnessed a major slowdown in H1 2023

The 369 acquisitions made by private equity portfolio companies in H1 2023 is the third highest H1 figure on record, a trend undoubtedly part driven by highly disruptive macroeconomic forces. As widespread uncertainty and falling valuations create a dearth of motivated sellers, private equity firms, many of which continue to sit on record levels of dry powder, have continued to channel capital and operational support towards supporting portfolio companies seeking to acquisitively grow market share.

Meanwhile, the cumulative value of these deals has plateaued and is on par with the corresponding period last year (both €1.5bn), while average deal value (€4.1m) represented a slight increase on H1 2022 (€3.2m). These figures are a continuation of a pandemic-era trend of sponsor-backed companies recognising an opportunity to consolidate market share as valuations dip and, in response, making more acquisitions at lower valuations.

The ongoing industry-wide pivot towards bolt-on deals was reflected in Equistone’s own activity, with the firm supporting 18 bolt-on acquisitions during the first half of the year. The even spread of these transactions – four by UK portfolio companies, seven by French, five in the DACH region and two by Benelux-based companies – was symptomatic of the Europe-wide nature of this shift.

“With the buyout market having slowed significantly in recent months, it’s unsurprising that firms have continued to gravitate towards supporting portfolio companies with strategic buy-and-build acquisitions focused on creating value,” said Christiian Marriott, Head of Investor Relations at Equistone. “Bolt-on deals ultimately provide firms with another path for productively deploying capital amid what are otherwise challenging market conditions.”

The relatively robust performance of bolt-on acquisitions stands in marked contrast to the European buyout market more broadly, which witnessed a major slowdown in both deal volume and value in H1 2023. The decline was most apparent among mega-deals (buyouts valued at €1bn+), as large-cap sponsors struggled to find debt financing amid a higher-interest-rate, risk-off environment.

“For many privately owned, mid-sized businesses, an uncertain macroeconomic picture naturally increases the attraction of a sale to a well-capitalised sponsor-backed platform,” added Professor Kevin Amess, Director of CMBOR at Nottingham University Business School. “We’ve seen this borne out in the data for the first six months of the year, with the robust level of activity within the buy-and-build market standing in marked contrast to subdued buyout activity.”

Notes to editors: Methodology 

The data compiled by CMBOR summarises trends in buyouts across Europe (Austria, Belgium, Denmark, Finland, France, Germany, Ireland, Italy, Netherlands, Norway, Portugal, Spain, Sweden, Switzerland and the UK). Data cut-off date: the data in this press release is for deals completed by 13 June 2023.

CMBOR defines buyouts as over 50% of shares changing ownership with management or private equity, or both having a controlling stake upon deal completion. Equity funding must primarily be from private equity funds and the bought-out company must have its own financing structure, e.g., MBO/MBI.

Media Contacts:

Hawthorn Advisors
James Davey / Daniel Thomas / Stephen Atkinson
Tel: +44 (0)20 3745 4960
mailto: j.davey@hawthornadvisors.com
mailto: d.thomas@hawthornadvisors.com
mailto: s.atkinson@hawthornadvisors.com

Source: Equistone Partners