by Fraser Tennant
Private equity (PE) investment in European companies reached a new record of €80.6bn in 2018 – a 7 percent year-on-year increase – according to a new report by Invest Europe.
According to the association’s ‘2018 European Private Equity Activity Report’, PE funds invested in over 7800 companies last year – also a new record – with 86 percent of the total made up by small and medium-sized enterprises (SMEs).
The report also reveals that investment increased across all segments of PE, including larger buyouts, mid-market investments and growth capital, with venture capital backing for European companies hitting an all-time high of €8.2bn.
“Record investment levels show that private equity and venture capital can identify attractive companies with the capacity to grow whatever the broader political and economic climate,” said Michael Collins, chief executive of Invest Europe. “Europe is packed with high-potential and innovative businesses, and private equity is increasingly seen as a supportive partner for companies looking to expand.”
In addition, fundraising remained strong in 2018, with €97.3bn committed to European PE – the highest total since the financial crisis. Investors from outside Europe contributed 46 percent of total fundraising. Pension funds remained the largest investor group, accounting for almost one-third of total fundraising.
In terms of European venture capital fundraising, a new high of €11.4bn was reached, up 11 percent from 2017. Private investor interest increased with family offices and private individuals accounting for 20 percent of capital raised, which was closely followed by funds of funds and other asset managers on 19 percent. The proportion contributed by government agencies fell to 18 percent, the lowest share in a decade.
“European venture capital has truly come of age thanks to a combination of strong returns, a growing band of billion-euro-plus tech and life sciences start-ups, and a string of high-profile exits, including the listing of music streaming service Spotify and the sale of mobile payments platform iZettle,” said Nenad Marovac, chair of Invest Europe. “There are eager strategic buyers and open markets around the world for Europe’s top-quality start-ups. The result is increasing appetite among global institutional investors who see European venture as the way to invest in some of the world’s most dynamic and entrepreneurial companies.”
The report covers PE activity on over 1400 firms, directly verified by the fund managers via the European Data Cooperative (EDC). The EDC holds data from over 3300 European PE firms on 9000 funds, 75,000 portfolio companies and 255,000 transactions since 2007.