ROLAND BERGER SRL

  |  05.03.2014

European Private Equity Outlook 2014

82% of those surveyed expect a major increase in private equity activities in Europe

These are the key findings of the new "European Private Equity Outlook 2014" study by Roland Berger Strategy Consultants. Our fifth Outlook in series reveals again how experts see the market and its development in 2014. The study represents the market insight of up to 900 private equity professionals from across Europe, including Central and Eastern European region.

 

"The outlook for the European private equity market is promising. 82% of the market players expect that the number of acquisitions involving private equity investors will go up in 2014. As anticipated, 2013 was not the best year for PE activities. For instance, PE firms invested approx. EUR 22.5 billion throughout Europe in the first 9 months of 2013. This figure was almost EUR 27 billion during the same period in 2012. "High price expectations among sellers in 2013 led to fewer transactions," explain Roland Berger consultants. "This year we expect a considerable convergence in the price expectations of buyers and sellers."

 

Germany and Great Britain are especially bullish. This is because the availability of attractive acquisition targets and the overall economic situation is fueling the M&A market in these countries. Specifically, industry players expect transactions in Germany to increase by 4.3% and in Great Britain by 3.3%. Even economically weaker markets, such as the European countries along the Mediterranean, will presumably recover from the euro crisis and enjoy a slight rise in PE activities – with the exception of Greece. These are the findings of Roland Berger's new "European Private Equity Outlook 2014"

 

Focus on consumer goods, retail, pharmaceuticals and SMEs

 

The key target industries for private equity investors will remain consumer goods and retail (63%), pharmaceuticals and healthcare (61%) as well as technology and media (55%). Compared to last year, the energy sector will experience the biggest drop. According to the authors of the study, "The public debate on energy transition and uncertain framework  conditions are still holding back transactions here."

Looking at the size of takeover candidates, 88% of those surveyed expect that most transactions will involve small and medium-sized enterprises – for a maximum acquisition volume of EUR 250 million. "This is also in line with the trend seen in previous years and is especially evident in those countries with strong SME landscapes, such as Germany," explain Roland Berger consultants. "Furthermore, many SMEs are still facing succession problems. This means more and more companies are opening up to the idea of external investors."

 

Investors are looking forward to attractive acquisition sources in 2014 – especially majority holdings in family businesses (59%) and subsidiaries carved out from big corporations (51%). Secondary buy-outs will retain a smaller but still significant role (45%).

 

Active portfolio management is imperative

 

Private equity companies, however, are not only focusing on new acquisitions. According to 98% of those surveyed, it is equally important to actively manage the portfolio.

 

"Investors can no longer afford to adopt a passive strategy with their portfolio companies," note the consultants. "Instead, owners must actively contribute to the successful development of their investments."

 

This view is now shared by practically all market players. Investors agree that only a balance mixed of strategic and operational actions can increase the value of their portfolio companies.

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