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European Private Equity Outlook 2019: PE industry less optimistic now

Portrait of Christof Huth
Senior Partner
Munich Office, Central Europe
+49 89 9230-8291
February 25, 2019

Economic worries and geopolitical uncertainties combine to depress the number of M&A transactions with PE involvement

Optimism in the private equity (PE) industry is significantly down on previous years. This is one of the findings of the new European Private Equity Outlook 2019, Roland Berger's annual survey of PE experts across Europe: In 2019, less than one third of those polled anticipate an increase in the number of M&A transactions with PE involvement. And for the first time in many years, almost half (48%) of PE professionals expect the number of transactions to fall this year. Geopolitical uncertainties and concerns about the economy are behind their pessimism.

Political and economic uncertainty is a cause for concern in the private equity industry.
Political and economic uncertainty is a cause for concern in the private equity industry.

Smoldering trade wars and geopolitical uncertainties owing to the pending Brexit and restrained forecasts for economic growth in countries of Europe and around the world are weighing on sentiment in the PE industry. Whereas optimists were in the majority for years, their numbers were down 20 percentage points on 2018 levels, accounting for just 31 percent of respondents in 2019. But there are positive expectations for certain regions: PE experts anticipate an increase in M&A deals with PE involvement in Spain, Portugal, Scandinavia and to a lesser degree in Germany/Austria/Switzerland for 2019. The UK ranks last as a result of Brexit uncertainties. Expectations are also down for Italy, Greece and France owing to the flagging economy there.

"Private equity is no different to other industries in that trade wars, Brexit and muted economic forecasts are having an impact."
Portrait of Christof Huth
Senior Partner
Munich Office, Central Europe

Pharma & healthcare is the most attractive industry, construction trails the field

The survey indicated no change in the most attractive sectors for PE investment: The industries considered most likely to see a high number of M&A transactions are once again pharma & healthcare (72%), technology & media (70%) and business services & logistics (65%). The least attractive market for PE involvement is construction, scoring just 7 percent, a full 11 percentage points down on 2018.

A key focus for the PE professionals polled lies on developing portfolio companies: 32 percent of those polled (10 percent more than in 2018) cite this as the top priority. Given all the uncertainty around today, weatherproofing their portfolio is considered key. But PE firms are also keen to make add-on acquisitions and increase their capabilities in digitalization/Industry 4.0 to create value in their portfolio.

Competition from China expected to level off

Chinese investors buying into European companies are still a hot topic. But the surveyed professionals think that competition from China has more or less found its level now: In this year's poll, just 28 percent of respondents expect competition from strategic or financial investors from China to increase further. Last year, 42 percent of respondents held that view. There would seem to be two pivotal reasons for this: On the one hand, we are seeing Chinese investors becoming increasingly selective and no longer being so quick to pounce on targets, and on the other hand Europe's governments have lately put up new regulatory barriers.

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European Private Equity Outlook 2019

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The 10th successive annual poll of private equity experts in Europe presents the sector's outlook for the year: What is the trend in the number of M&A transactions with PE involvement in European countries, which are the most attractive industries, what are the success factors, and so on.

Published February 2019. Available in
Portrait of Sven Kleindienst
Senior Partner
Munich Office, Central Europe
+49 89 9230-8539
  • Photos Sarathsasidharan / Getty Images; Jung von Matt; Yagi-Studio/iStock; PeopleImages / iStockphoto