European Private Equity Buyout Review
FIRST HALF 2019 Table of Contents
Europe’s PE Buyout Market in H1 2019 3 € Invested and # Companies Financed 5 Top PE Buyout Deals 7 Europe by Stage 8 Investment by Company Location 9 Investor Nationality 11 Investment by Company Sector 12 PE Investment vs. all European M&A 13 European Dealmaking Abroad 14 Buyout Funds Raised 15 PE Buyout Backed Exits 16 PE Buyout Returns 17 Explanatory Notes & Contacts 18
2 European Private Equity Buyout Market Activity in H1 2019
European PE Buyout Market Trends
Europe’s buyout and related private equity market saw a total of €41.6 billion invested in 624 rounds of financing throughout the first six months of 2019. In round value terms this marked a decrease of 19% from the same period last year, however volumes were up 13%.
The European Top Rounds list for the half was led by Poole-based entertainment company Merlin Entertainments, which received a recommended offer of €6.6 billion announced at the end of June by a consortium that included the owner of the LEGO brand, KIRKBI, as well as Blackstone and CPPIB. The other two deals rounding out the top three also took place in the second quarter and included the approximately €4.3 billion minority investment by The Carlyle Group into multinational oil and gas giant, Cepsa, headquartered in Madrid, as well as the €4.0 billion acquisition of travel technology company Travelport Worldwide by Siris Capital Group and Evergreen Coast Capital, an affiliate of Elliott Management Corporation.
Foreign fund participation in European PE deals declined slightly in H1, with outside investor involvement in 21% of total financings. Local fund involvement increased during the period up to 86%. U.S. based investors were the most active foreign backers in the half, with involvement in 93 rounds.
While European buyout deal volumes were up 13% from 2018 levels, overall European M&A activity declined by 11% over the same period, resulting in the share of PE deals’ contribution of total traditional M&A increasing from 6.6% to 8.5%, a portion that hasn’t been seen 2014.
European PE Buyout Fundraising Trends
European buyout firms raised a total of €28.6 billion across 36 funds during the first six months of 2019, a decrease of 4% of funds raised year-over-year. At the top of the list was the €10.0 billion close of the Seventh Cinven Fund, which reached its hard cap in less than four months. Next up was the €4.0 billion Astorg Fund VII, which closed in January above its initial target of €3.2 billion and will primarily target European B2B companies with values between €200 million and €2 billion. Another substantial raise during the half was the initial €3.8 billion close of CVC Capital Partners’ Strategic Opportunities II in April, which later had its final close in July at €4.6 billion.
3 European Private Equity Buyout Market Activity in H1 2019
European PE Trends by Region
Companies headquartered within the United Kingdom were the most active in the half, both in terms of deal values and volumes, with 198 deals representing a 32% share of the regional total and €23.3 billion representing a 56% share. Spain came second in the national value rankings at €5.7 billion despite being only the fifth most active region with 35 deals, largely thanks to the €4.3 billion Cespa investment. France placed third in the value rankings and second in the volume rankings, with a total of €3.2 billion across 184 rounds.
European PE Exit Trends
European PE-backed companies saw a total of 152 exits completed throughout the first six months of 2019. This was down 14% from 2018 and was the slowest start to a year since 2009. Exits were fairly evenly split between strategic trade sales and secondary buyouts by other firms, with volumes of 77 (51%) and 72 (47%), respectively.
European PE Trends by Sector
Industrial/Energy, Consumer Related, and Software companies were the main driving force behind European buyout investment values in H1 2019, with rounds valued at €9.5 billion (23%), €8.1 billion (20%), and €7.1 billion (17%) each through to the end of June. Software and Consumer Related businesses were also the most active in the period from a volume perspective, with deal counts of 99 (16%) and 90 (14%).
European Fund Performance
Data provided by Cambridge Associates showed European buyout funds with vintage years of 2000 or greater returned a since inception IRR of 13.3% as of the end of Q1 2019, staying in line with their U.S. counterparts and well above public market equivalents which saw since inception returns of just 5.6% during the same period. Returns have been steadily climbing since the beginning of 2014, which had a yield of 12.3%.
4 Historical Investment in European Companies: PE Buyout Deal Values European companies saw buyout and related deal values of €41.6 billion in H1, down 19% from the same period last year but still remaining the third strongest first half in the previous decade.
€ 200
€ 180 €161.8
€ 160
€ 140 €128.9
Billions) € 120
€ € 100 €94.4 €90.0 €90.7 €86.2 € 80
€56.4 €56.8 €58.4 € 60 €51.5 €51.6 €47.9 €46.9 €45.9 €44.0 €44.8 €41.6 €34.3 PE Deal Values ( Values Deal PE € 40 €31.9 €21.4 € 20
€ 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Q1 Q2 Q3 Q4
5 Historical Investment in European Companies: PE Buyout Deal Volumes A total of 624 buyout and related private equity deals were completed during the first six months of 2019. Against the drop in values, these volumes were up 13% from the same period last year.
2,500
2,000
1,857
1,639 1,554 1,500 1,338 1,356 1,365 1,281 1,306 1,275 1,232 1,247 1,269 1,166
995 911 1,000 866
624 # of PE Buyout Deals Buyout PE of # 609 576 558 500
0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Q1 Q2 Q3 Q4
6 Top European Private Equity Deals First Half 2019
Portfolio Company Investors Deal Value Rank Company Name Location Sector Investing Firms (Disclosed) (€ Millions)
Poole, United KIRKBI, The Blackstone Group, Canada Pension Plan Investment 1 Merlin Entertainments €6,597.5 Attraction Operators Kingdom Board
2 Cepsa €4,263.3 Madrid, Spain Oil & Gas The Carlyle Group
Slough, United 3 Travelport Worldwide €3,953.3 Travel Technology Siris Capital Group, Elliott Management Corporation Kingdom London, United Apax Partners, Warburg Pincus, Canada Pension Plan Investment 4 Inmarsat €2,995.9 Inflight Broadband Kingdom Board, Ontario Teachers’ Pension Plan
5 IFCO SYSTEMS €2,213.2 Pullach, Germany Packaging Solutions Triton, Luxinva
Farnham, United 6 BCA Marketplace €2,120.6 Vehicle Marketplace TDR Capital Kingdom Renfrew, United 7 Howden €1,611.2 Industrial Manufacturing KPS Capital Partners Kingdom
8 CapeOmega €1,200.0 Bergen, Norway Midstream Infrastructure Partners Group
Nelson, United 9 Daisy Group €1,163.8 Internet Communications Ares Management Kingdom Alternative Investments 10 eFront €1,157.3 Paris, France BlackRock Software
7 PE Buyout Dealmaking: Deal Volumes by Transaction Type Acquisition for expansion stage deals continued to increase their share in the first six months of 2019, with 253 rounds representing 41% of overall volumes, a share that has been steadily growing since 2004 when they made up only 5%.
100%
90%
80%
70%
60%
50%
40% % Rounds of % 30%
20%
10%
0% 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 H1 2019 Control Stake Minority Stake Acquisition for Expansion Secondary Buyout Other
8 European PE Buyout Rankings, by Nation
European Rankings – First Half 2019
Round Values Round Values # of Rounds # of Rounds Rank Nation % Change (€ Millions) (€ Millions) % Change H1 2019 H1 2018 H1 2019 H1 2018
1 United Kingdom 198 154 ▲28.6% 23,261.6 10,440.2 ▲122.8%
2 Spain 35 24 ▲45.8% 5,681.4 3,782.5 ▲50.2%
3 France 184 165 ▲11.5% 3,164.8 3,877.6 ▼-18.4%
4 Germany 51 70 ▼-27.1% 2,543.5 7,175.0 ▼-64.6%
5 Italy 58 37 ▲56.8% 2,022.1 3,444.6 ▼-41.3%
6 Netherlands 25 36 ▼-30.6% 1,844.8 17,019.9 ▼-89.2%
7 Norway 7 6 ▲16.7% 1,200.0 36.6 ▲3,174.6%
8 Denmark 9 3 ▲200.0% 495.8 - -
9 Switzerland 7 8 ▼-12.5% 438.7 16.7 ▲2,527.1%
10 Ireland 13 7 ▲85.7% 310.8 67.7 ▲358.8%
9 PE Buyout Dealmaking: Deal Volumes by Company Nation Companies headquartered in the United Kingdom saw their share of all buyout activity return to the top spot in the second quarter, with 32% of all volumes in the first half of 2019. France-based companies saw 29% of the total, up from 27% in 2018.
100%
90%
80%
70%
60%
50%
40%
30% # of PE Buyout Deals Buyout PE of # 20%
10%
0% 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 H1 2019 United Kingdom France Germany Netherlands Spain Italy Sweden Finland Denmark Other
10 PE Buyout Dealmaking: Deal Volumes by Investor Location European investors participated in 86% of all rounds in the first half of 2019, up from an 83% participation rate throughout all of both 2018 and 2017. Foreign funds participated in 20%, down from 21% during full year 2018.
100%
90%
80%
70%
60%
50%
40% % Rounds of % 30%
20%
10%
0% 2014 2015 2016 2017 2018 H1 2019 Rounds Including European Investors Rounds Including Foreign Investors
11 European PE Buyout Investment by Sector, First Half 2019 Companies within the Computer Software sector comprised 16% of all rounds recorded during the period, making it the most active sector. Industrial & Energy companies captured the largest share of round values with €9.5 billion, or 23%.
First Half 2019 Total # of Rounds First Half 2019 Total Round Values (€ Billions) 120 € 10
€ 9 100 € 8
€ 7 80 € 6
60 € 5
€ 4 40 € 3
€ 2 20 € 1
0 € 0
Computer Software Consumer Related Internet Specific Industrial/Energy Business Services Medical/Health Financial Services Transportation Manufacturing Construction Communications Other
12 PE Buyout Dealmaking Versus All M&A of European Targets While European buyout deal volumes were up 13% year-over-year, European M&A deal volumes declined by 11% in H1, resulting in PE deals’ share of traditional M&A climbing to 8%, a first half level not seen since 2014.
400 12%
350 10%
300
8% 250
200 6%
# of Rounds of # 150 4%
100
2% 50
0 0% Q1'14 Q2'14 Q3'14 Q4'14 Q1'15 Q2'15 Q3'15 Q4'15 Q1'16 Q2'16 Q3'16 Q4'16 Q1'17 Q2'17 Q3'17 Q4'17 Q1'18 Q2'18 Q3'18 Q4'18 Q1'19 Q2'19 # of PE Rounds PE Rounds as % of all M&A Activity
13 Top PE Investments by European Firms in Non-European Companies First Half 2019
Portfolio Company European Investors
Round Value Rank Company Name Location Sector Investing Firms (Disclosed) (€ Millions)
Communications 1 Zayo Group €9,481.4 Boulder, CO EQT Infrastructure Praxair & Linde AG – U.S. €3,146.7 Danbury, CT 2 Industrial Gas Assets Business Industrial Gas CVC Capital Partners, Messer Group
3 Tallgrass Energy €2,934.1 Leawood, KS Energy Infrastructure Enagás
4 ConvergeOne €1,579.9 Eagan, MN IT Services CVC Capital Partners Wellington, New Trade Me €1,510.2 5 Zealand Online Marketplace Apax Partners
€ 25
€ 20
€ 15 Values Values
€ 10 Billions)
€ 5
€
Round Round ( € 0
PE PE Q1'15 Q2'15 Q3'15 Q4'15 Q1'16 Q2'16 Q3'16 Q4'16 Q1'17 Q2'17 Q3'17 Q4'17 Q1'18 Q2'18 Q3'18 Q4'18 Q1'19 Q2'19
14 PE Buyout Fundraising by European Firms A total of 36 European buyout funds raised €28.6 billion in H1 2019. Top fundraisings included Cinven’s raise for its Seventh Cinven Fund at its hard cap of €10 billion, as well as the final close of Astorg VII at its hard cap of €4.0 billion.
€ 30
€ 26.1
€ 25 € 22.9
€ 20.8 Billions)
€ 20 € € 17.8
€ 15.0 € 15.1 € 15 € 12.7 € 11.9 € 11.3 € 11.2 € 10.8
€ 10 Funds Raised ( Raised Funds
€ 6.7 € 6.7 € 5.7 € 5.2 € 5 € 4.1 € 3.2 € 1.7
€ 0 Q1'15 Q2'15 Q3'15 Q4'15 Q1'16 Q2'16 Q3'16 Q4'16 Q1'17 Q2'17 Q3'17 Q4'17 Q1'18 Q2'18 Q3'18 Q4'18 Q1'19 Q2'19
15 European PE Backed Exits, First Half 2019 Europe saw 152 completed exits from PE-backed companies in H1 2019, down 14% from H1 2018 volumes and the slowest first half since 2009.
Portfolio Company
Round Value Rank Company Name Location Sector Exiting Investors (Disclosed) (€ Millions)
1 Antelliq Corp €3,265.5 Vitré, France Animal Health BC Partners, PSP Investments
London, United Development Partners International, Capital Group, Ethos Private 2 Eaton Towers €1,662.2 Telecom Kingdom Equity, Hamilton Lane, HarbourVest Partners, Affirma Capital
3 Neovia €1,549.8 Vannes, France Animal Nutrition Eurazeo, SODICA, Unigrains
London, United 4 Trainline €1,225.6 Rail Tickets KKR Kingdom
140 120
100 80 60
# of Exits of # 40 20 0 Q1'15 Q2'15 Q3'15 Q4'15 Q1'16 Q2'16 Q3'16 Q4'16 Q1'17 Q2'17 Q3'17 Q4'17 Q1'18 Q2'18 Q3'18 Q4'18 Q1'19 Q2'19 M&A Secondary Sale Public Exit
16 Cambridge Associates: Buyout Fund Performance European private independent funds continue to show strong performance against the public markets and equivalent returns relative to buyout funds based in the U.S.
14% 14% 13.3% 13.5%
12% 12%
10% 10%
8% 8%
6% 6%
4% 4%
2% 2% Q1 2014 Q1 2015 Q1 2016 Q1 2017 Q1 2018 Q1 2019 Q1 2014 Q1 2015 Q1 2016 Q1 2017 Q1 2018 Q1 2019 European Buyout Funds mPME: MSCI Europe Index U.S. Buyout Funds mPME: S&P 500 Index
Source: Cambridge Associates 17 Explanatory Notes
1. Data collected and analyzed by Refinitiv for this statistical report were drawn from a variety of sources including Refinitiv M&A databases, regulatory filings, press releases, and proprietary reports from European and non-resident buyout firms, private equity firms, law firms, and other service providers.
2. Key statistical indicators (e.g., total disbursements, per quarter or per annum) are influenced by the fact that a substantial fraction of buyout and other PE deals are not fully disclosed. For instance, “Euros invested” in a given period pertain only to those deals with values that have been published or confidentially disclosed to Refinitiv.
3. Statistical data reflect all essential forms of buyout-PE deal-making, including control-stake acquisitions of businesses, minority equity investments, restructuring and special-situations transactions, mezzanine deals, acquisitions for expansion and other quasi-equity investments.
4. Fund performance data and public market equivalents are produced via the Cambridge Associates Benchmark Calculator, available through Refinitiv Eikon. Returns are for European and U.S. buyout funds with vintage years of 2000 or greater, on a first cash flow basis, in Euros, from inception to the end of the indicated quarter, under published data mode Q1 2019. Pooled internal rates of return are net of fees, expenses and carried interest. CA Modified Public Market Equivalent (mPME) replicates private investment performance under public market conditions. The public index’s shares are purchased and sold according to the private fund cash flow schedule, with distributions calculated in the same proportion as the private fund, and mPME NAV is a function of mPME cash flows and public index returns. 5. Rounds are tracked based on investment headquarter location. 6. All current and previous years data is as of Tuesday, August 20th, 2019. Data is continuously updated and is therefore subject to change. All figures are in Euros unless otherwise noted.
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