Pitchbook's 2024 European Private Capital Outlook

Tracey Alper our consultant managing the role

Pitchbook's 2024 European Private Capital Outlook whitepaper provides a comprehensive analysis of the past year's trends and its impact on private equity and venture capital in Europe. Despite the challenges posed by market uncertainty in 2023, the report suggests that there is potential for growth and development in these asset classes in the coming year.

One of the key highlights of the report is the slower dealmaking activity in Europe in 2023, with a notable decline in venture capital deals compared to private equity. However, it is important to note that this is not indicative of a collapse, but rather a correction after the unprecedented levels of activity seen in 2021 and 2022.

In terms of exits, the IPO of UK-based Arm stands out as a major liquidity event in 2023, while VC-backed public listings have faced challenges due to the modest share prices of previously backed companies. This can be attributed to macroeconomic factors such as inflation and weak economic growth.

Looking towards 2024, there are signs of potential improvement in market sentiment with interest rate hikes being paused and the cost of debt flattening. This could result in increased activity and dealmaking in the private capital space. The report also highlights contrasting trends in capital raised by PE and VC funds in 2023. While major PE firms saw success with megafund closures, VC fundraising has been slower and is expected to fall below the total for 2022. However, this does not diminish the potential of European VC funds to raise significant capital.

The European PE investments/exits ratio will reach a 15-year high due to a muted exit market stemming from price dislocation

In addition to the current macroeconomic headwinds, there are several other factors that could impact the European private capital outlook for 2024. One of these is the ongoing trade tensions between major economies, which could lead to increased volatility in global markets and potentially affect exit opportunities for private equity firms.

Another factor to consider is the potential impact of Brexit on the European private capital market. With the UK's departure from the EU, there may be changes in regulations and policies that could affect dealmaking and exits for European private equity firms. Furthermore, the shift towards sustainable investing is also expected to have an impact on the private capital landscape in Europe. As investors become more conscious of their environmental and social impact, they may demand higher standards from private equity firms, potentially affecting investments and exits.

Finally, the rise of technology and digital disruption in various industries could also impact the private capital market in Europe. As traditional business models are challenged by modern technologies, private equity firms may need to adapt and invest in new areas to stay competitive.

Overall, according to Pitchbook, while the current macroeconomic conditions are a major factor in shaping the 2024 European private capital outlook, there are also other potential risks and opportunities that could impact the industry. It will be crucial for firms to stay informed and agile to navigate these changes and make strategic investment decisions.

snippet image

PE fundraising concentration in the top three funds will hit a record percentage as fundraising drops from 2023 levels due to macro headwinds

snippet image

The European private capital market has seen significant growth in recent years, with PE fundraising hitting a record high in 2023. However, despite this impressive feat, there are concerns about the sustainability of such growth and potential risks that may impact future fundraising efforts.

One key factor contributing to the success of PE fundraising is the presence of experienced managers with established histories and strong relationships with clients. These factors have allowed them to navigate the challenging economic environment and continue to attract significant capital.

Looking ahead to 2024, it is expected that fundraising will decrease compared to the record levels of 2023. This can be attributed to a lack of exits, as well as higher interest rates making borrowing more costly for PE firms. If fundraising in 2024 drops below €100 billion, European fundraising will hit a record concentration in the top three funds.

Despite potential challenges, there are several factors that may continue to drive growth in the European private capital market. This includes an increasing number of institutional investors allocating to private markets and the potential for interest rate cuts to stimulate further fundraising.

Megadeals will constitute less than 20% of overall PE deal value as uncertainty around the cost of debt persists

snippet image
snippet image

In the 2024 edition of their European Private Capital Outlook, Pitchbook highlights the trend of decreasing megadeals (deals worth €1 billion or more) in recent years and predicts that this will continue in 2024. 

This is due to numerous factors such as the rising interest rate environment making it less favourable for large leveraged buyouts and a shift towards smaller, mid-sized deals. However, Pitchbook also notes that “the current macroeconomic landscape could lead to interest rate hikes levelling out and potentially even falling in 2024, which could result in larger deals closing”. Additionally, with several substantial PE funds having closed in 2023 and looking to deploy capital, there may be opportunities for megadeals to be revived in 2024. The potential for discounted valuations could also function as a catalyst for dealmaking, making it an interesting year ahead in the European private capital market.

There will be no meaningful recovery in the value and volume of VC-backed IPOs in 2024 as macroeconomic factors weigh on public markets.

snippet image

With interest rates expected to remain high for the foreseeable future, there is a cautious outlook for IPOs and exit values. This has been evident in recent IPO performances of companies such as Arm, Ionos and Oddity Tech. As a result, companies may need to explore alternative means of extending their cash runways or raising new financing, such as cost-cutting measures or venture debt.

However, this does not mean that the pipeline for listings is dry. In fact, there are reports of prominent players like Huel and CVC Capital Partners considering IPOs, and when market conditions improve, the recovery in listings activity is expected to be strong. The challenge lies in predicting when this will happen, but if interest rate cuts are implemented next year, we could see a more favourable environment for tech company valuations and an increase in companies choosing to go public.

Nevertheless, there is still the question of value over volume. While there may be an increase in listing count, they are likely to occur at lower valuations compared to previous years due to the correction in portfolio company valuations. Additionally, with a focus on achieving profitability, startups may see a higher valuation multiple if they have a clear path towards profitability. 

VC fundraising levels will at least match 2023 totals as recovery from trough levels begins, supported by larger vehicles

snippet image

Pitchbook's whitepaper, suggests that despite weak returns in venture strategies and the uncertainty brought on by the pandemic, LPs are still interested in investing at the dip to optimize their returns. This is supported by the fact that over a longer time horizon of 15 years, venture has emerged as one of the top returning strategies. However, some LPs may remain cautious due to the current weak liquidity and exit markets in Europe.

The report also highlights that while acquisitions have taken a larger share of exits, the overall exit market could see improvement next year. This would not only support limited partner (LP) liquidity but also provide better returns. The total amount raised by the top 10 closes for this year has been €6.6 billion, which accounts for 39.2% of all capital raised so far. Looking at current fundraising dynamics, the top 10 open funds since 2020 have a potential to raise a total of €9.1 billion, exceeding the total amount raised by the top 10 closes in 2023.

However, due to the challenging fundraising environment in private markets, with lower levels of capital being raised and longer close times, it is expected that LP allocations to venture may remain low in 2023. This is further supported by the fact that venture has been one of the lower-performing strategies on a one-year horizon IRR, although its long-term returns are more promising. The presence of megafunds in the private equity space has also contributed to its higher levels of fundraising compared to venture. Additionally, with continued decline in valuations and uncertainty surrounding macro factors such as interest rates, LPs may remain cautious about making new investments.

Despite these challenges, it is worth noting that there will be more fund closes in 2024, especially among smaller funds which could boost the overall fundraising total. year.

The UK will remain the European leader for private capital, but France and Germany could close the gap amid a challenging geopolitical landscape


snippet image
However, this trend may see a shift in 2024. With a UK general election scheduled for that year, there is potential for major changes to be implemented in areas such as taxation on carried interest and regulation of fund structures. This uncertainty may lead investors and operators to pause decision-making until a clearer legislative landscape is established.

Meanwhile, other European nations like France and Germany are actively seeking to boost their private capital activity. France, in particular, is focusing on developing a strong tech ecosystem and may become a more attractive investment destination for private capital.

In addition, investors may look towards other less-saturated nations that offer fewer competitors and potentially lower asset prices. This could lead to a decrease in deal value for traditional private capital hubs like the UK and US.

Despite the potential challenges ahead, the UK is expected to maintain its lead in terms of deal value in 2024. The country has proven its resilience in the face of crises and has not lost ground in private market appetite. With a possible rebound towards target levels of inflation by late 2024, other nations may struggle to catch up with the UK's strong private capital investments. 

Find your next investor-led CFO or Executive Finance role with Marks Sattin Executive Search

At Marks Sattin Executive Search, we work with a wide range of investor-led and privately owned businesses across all sectors and locations. With over 30 years of experience, we have helped several professionals find their next exciting opportunity in private equity.

Apply for an available CFO or Executive Finance job with us today or register your details to shortlist jobs so you never miss an opportunity.  

15/01/24
posts

Related articles

Why London is the best place to find your next contract opportunity
Why London is the best place to find your next contract opportunity

Teaser

General

Content Type

Career Advice

29/03/24

Summary

Are you considering a change of scenery? Just look at London - an incredibly diverse city, with over 1,600 languages spoken and 300 nationalities represented.  At the centre of the UK's 4.2 milli

Teaser

Land your next contracting job in London with Marks Sattin.

Read full article
Kelvin Murphy

by

Kelvin Murphy

Kelvin Murphy

by

Kelvin Murphy

Tips to attract the best software engineering candidates
Tips to attract the best software engineering candidates

Teaser

Technology

Content Type

General

19/03/24

Summary

The UK tech sector retains the number 1 spot in Europe and number 3 in the world as sector resilience brings continued growth. With this demand comes stiff competition. London offers a wide range

Teaser

Learn about software engineering candidate preferences.

Read full article
Ghazal Mayahi

by

Ghazal Mayahi

Ghazal Mayahi

by

Ghazal Mayahi

Why RegTech is the industry to watch in 2024
Why RegTech is the industry to watch in 2024

Teaser

Technology

Content Type

General

27/02/24

Summary

The year 2024 emphasises the crucial role of RegTech — a beacon guiding firms through the evolving global regulatory landscape, enabling them to connect the dots between short-term challenges and

Teaser

Explore why RegTech emerges as the industry to watch.

Read full article
Paul Roche

by

Paul Roche

Paul Roche

by

Paul Roche

jobs

Related jobs

Management Accountant

Salary:

£50,000 - £55,000 per annum

Location:

Bracknell, Berkshire

Industry

Property and Infrastructure

Qualification

Finalist / Newly qualified

Market

Commerce & Industry

Salary

£50,000 - £60,000

Job Discipline

Newly Qualified Finance

Contract Type:

Permanent

Description

Management Accountant - Bracknell (3 days on site) - Salary to £55,000 + Bonus

Reference

BBBH179956

Expiry Date

01/01/01

Neil Burton

Author

Neil Burton
Neil Burton

Author

Neil Burton
Find out more
Payroll Assistant

Salary:

£28,000 - £30,000 per annum

Location:

Bradford, West Yorkshire

Industry

Professional Services

Qualification

None specified

Market

Commerce & Industry

Salary

£30,000 - £35,000

Job Discipline

Part Qualified & Transactional Finance

Contract Type:

Permanent

Description

Marks Sattin are currently recruiting a Payroll Assistant on behalf of a leading service provider, based in Bradford.

Reference

BBBH179966

Expiry Date

01/01/01

Yasmin Clough

Author

Yasmin Clough
Find out more
Reconciliations Controller

Salary:

£28,000 - £30,000 per annum

Location:

Leeds, West Yorkshire

Industry

Professional Services

Qualification

None specified

Market

Commerce & Industry

Salary

£30,000 - £35,000

Job Discipline

Part Qualified & Transactional Finance

Contract Type:

Permanent

Description

Marks Sattin are currently recruiting a Reconciliations Controller on behalf of an International Law firm, based in Leeds City Centre.

Reference

BBBH179904

Expiry Date

01/01/01

Yasmin Clough

Author

Yasmin Clough
Find out more
Credit Controller

Salary:

Up to £35,000 per annum

Location:

Winsford, Cheshire

Industry

Manufacturing

Qualification

None specified

Market

Commerce & Industry

Salary

£35,000 - £40,000

Job Discipline

Part Qualified & Transactional Finance

Contract Type:

Permanent

Description

Credit Controller

Reference

BBBH179983

Expiry Date

01/01/01

Glenn Fyfe

Author

Glenn Fyfe
Glenn Fyfe

Author

Glenn Fyfe
Find out more
Credit Controller

Salary:

Up to £25,000 per annum

Location:

Liverpool, Merseyside

Industry

Business Services

Qualification

None specified

Market

Financial Services

Salary

£25,000 - £30,000

Job Discipline

Newly Qualified Finance

Contract Type:

Permanent

Description

Credit Specialist Liverpool £25,000 per annum

Reference

BBBH179943

Expiry Date

01/01/01

Terri Bishop

Author

Terri Bishop
Find out more
Senior Management Consultant

Salary:

€45,000 - €50,000 per annum

Location:

Dublin City Centre, Dublin

Industry

Business Services

Qualification

None specified

Market

Commerce & Industry

Salary

£40,000 - £50,000

Job Discipline

Project & Programme Management

Contract Type:

Permanent

Description

Senior Management Consultant - Dublin - Health & Higher Education Focus

Reference

BBBH179980

Expiry Date

01/01/01

Cillian Mcevoy Find out more
Group Strategy Manager

Salary:

€90,000 - €100,000 per annum

Location:

Cork

Industry

Business Services

Qualification

None specified

Market

Commerce & Industry

Salary

£80,000 - £100,000

Job Discipline

Change Management

Contract Type:

Permanent

Description

Group Strategy Manager - Cork

Reference

BBBH179944

Expiry Date

01/01/01

Cillian Mcevoy Find out more
Senior Manager - Digital Transformation

Salary:

€85,000 - €95,000 per annum

Location:

Dublin City Centre, Dublin

Industry

Business Services

Qualification

None specified

Market

Commerce & Industry

Salary

£80,000 - £100,000

Job Discipline

Project & Programme Management

Contract Type:

Permanent

Description

Senior Manager - Digital Transformation - Dublin

Reference

BBBH179806

Expiry Date

01/01/01

Cillian Mcevoy Find out more
Data Analytics Director

Salary:

€90,000 - €100,000 per annum

Location:

Dublin City Centre, Dublin

Industry

Professional Services

Qualification

None specified

Market

Commerce & Industry

Salary

£80,000 - £100,000

Job Discipline

Business Analysis

Contract Type:

Permanent

Description

Data Analytics Director - Financial Services - Dublin

Reference

BBBH179805

Expiry Date

01/01/01

Cillian Mcevoy Find out more
CRM Manager

Salary:

Negotiable

Location:

Dublin South, Dublin

Industry

Manufacturing

Qualification

None specified

Market

Commerce & Industry

Salary

£40,000 - £50,000

Job Discipline

Business Analysis

Contract Type:

Permanent

Description

CRM Manager - Dublin South - Global Manufacturing Company

Reference

BBBH179978

Expiry Date

01/01/01

Cillian Mcevoy Find out more
View all jobs