EY - Private equity value creation in Europe

Private equity value creation in Europe

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Private equity has consistently outperformed public equity markets, according to our analysis of the largest European businesses that PE has owned and exited over the past nine years. Results from 2013 add further weight to this.

Exit activity in 2013

In 2013, PE-backed IPOs rebounded to a level not seen since 2006. Secondary buyouts also recovered. In 2012, sales to other PE firms accounted for 38% of exits by number; in 2013, the proportion was far higher at 55%.

The rate of creditor exits slowed in 2013, and fell to their lowest level since before the crisis. This encouraging trend suggests that the worst may be behind PE in Europe.

Nevertheless, the third main exit route — trade — declined in 2013. Despite improving confidence among corporates, just 16 were sales to trade, compared with 25 in 2012.

These results demonstrate that PE is now emerging from the post-crisis period in good shape. After a difficult period, exits are coming through more steadily, and the value in the portfolio is now starting to be realized.

Value creation through a long-term lens

While PE has not been immune from the swings of the capital markets and the cyclical nature of the wider economy, it has continued to deliver returns.

Number of PE exits by exit route, 2005–13

EY - Number of PE exits by exit route, 2005–13


In the early 2000s, PE really started to heat up in Europe. The peak year for the value of deals in Europe was 2007.

Many believed PE would cause a seismic shift in the modern capital landscape. Underpinning this sentiment were strong returns.

The crash

In 2008, PE was hit hard by the effects of the financial crisis, the instability of the euro, and the global economic malaise.

Public opinion around PE shifted to negative in the extreme when PE was blamed for playing a part in causing the economic downturn.

The post-crisis recovery

Despite the difficult post-crisis period, PE’s value-enhancing measures have had a positive effect throughout the period. PE portfolios remained resilient and over 2010–13, 79% of all investments returned more than the initial investment.

European PE today

In 2013, US$114b was committed to European funds, and the signs suggest the totals will be higher in 2014. With exit, fund-raising and investment totals all growing, PE has turned the corner after a difficult few years.

PE has also taken great strides to improve its reporting and stakeholder engagement. Together with increasing regulation, this will help improve the industry’s image and standing.

Positive outlook, with conditions improving

Overall, the outlook for PE is positive. The conditions around the industry are improving on all fronts and there is strong activity in two of the three main exit routes.

2014 looks as though it will be another strong year for exits on the public markets. Also, secondary buyouts will continue to be a good exit route for PE.

The outlook for M&A is also promising as corporates are picking up their activity levels, which should provide both exit and new investment opportunities for PE.

After being surrounded by turbulence for nearly a decade, European PE is emerging as a mature and integral part of the continent’s economic landscape.