The , which provides a midyear evaluation of its private equity and venture capital , found that private equity (PE) and venture capital (VC) exit activity has “remained quiet” so far this year. Higher interest rates have increased the cost of capital, and PE and VC dealmaking have decelerated year to date, said Pitchbook.
“Despite most of Europe avoiding recessions, the macroeconomic indicators remain headwinds to PE deal activity. As a result, we have seen significantly low levels of take-privates and carveouts across the continent in H1 2023 as we have started seeing a recovery in public markets,” said Nicolas Moura, EMEA private capital analyst at Pitchbook and one of the report authors.
Here are a few key takeaways from the report.
Take-private deal value at €1.7bn
Pitchbook expected take-private deal value to reach €30bn in 2023, but “this outlook is not on pace to come true,” said the report. As of 31 May, take-private deal value is at €1.7bn, with a deal count of 14. Rapidly increasing interest rates have led to less activity and fewer potential take-private targets.
“Publicly listed companies have experienced mixed fortunes in 2023 thus far, with signs of recovery emerging. Therefore, the appetite for companies to delist may be subsiding as we enter H2 2023,” said Pitchbook.
However, taking a company private and keeping it public both have risks, noted the report, while companies in different sectors face different challenges.
Nine PE-backed public listings so far
Pitchbook expected fewer than 40 PE-backed public listings to take place in 2023, and this prediction is on track to come true. With volatility and stock market unease due to the in March and , public listings have remained rare this year, said the report.
As of 31 May, only nine PE-backed public listings have occurred, with a total exit value of €3.3bn.
Carveouts represent 10.3% of deal value
Pitchbook said they expected that PE carveout deal value would account for more than 15% of aggregate private equity deal value in 2023. Carveouts allow a parent company to separate itself from certain business activities. These have represented 10.3% of deal value so far this year, said the report.
With a focus on costs and operational efficiency during the start of 2023, carveouts may not have been an appealing strategy, Pitchbook suggested.
Record high dry powder, €6.8bn of VC fundraising
Macroeconomic uncertainty, rising interest rates and Russia’s war in Ukraine have led more cautious capital deployment and higher levels of dry powder in Europe. In addition, thanks to strong fundraising, Pitchbook expected to see a record €45bn of dry powder in Europe’s venture capital ecosystem in 2023.
This outlook is on pace to come true, said Pitchbook in its June report. European VC fundraising has seen €6.8bn so far this year, which is “on track to be as strong as the previous three years,” and Pitchbook expects to see fundraising pick up during the second half of 2023 if monetary policy tightening comes to an end.
Given the context, it also anticipates seeing increased caution and diligence in venture capitalists’ investment approaches.
Venture-growth stage represents 18.2% of deal value
Though Pitchbook predicted that the venture-growth stage would represent 25% of all deal value in Europe, this outlook is not on track to come true. “The venture-growth stage has represented 18.2% of deal value in Europe YTD, a slight downtick from 2022 and still a few percentage points away from our outlook,” said its June report.
The report also noted that only five new unicorns--which make up the bulk of venture-growth deal activity--have appeared in 2023, compared to 48 last year.
London, Paris, Berlin top European cities by VC deal value
As of 31 May, three European cities are amongst the top 15 cities by venture capital deal value globally, noted the report. These are London (€5.4bn, ranked third overall), Paris (€1.9bn, ranked ninth overall) and Berlin (€1.4bn, ranked 14th overall).
San Francisco (€23.7bn) and New York (€7.0bn) took first and second place in the ranking.
Find Pitchbook’s full “2023 European Private Capital Outlook: H1 Follow-Up” report .