Private equity megabuyouts in Europe, UK show higher value, fewer deals

The aggregate transaction value of private equity megabuyouts in Europe and the UK has increased by 28.2% so far in 2023 compared to full year 2022, while the total number of deals declined.

Megabuyouts — whole company acquisitions with announced deal value of more than $1 billion — in the region totaled $60.41 billion across 15 deals in the year to Nov. 27, compared to $47.11 billion across 22 transactions for all of 2022, according to S&P Global Market Intelligence data.

There has been a clear flight to quality in the financing markets in 2023, and top-notch assets tend to be more expensive, Aymen Mahmoud, a partner at McDermott Will & Emery UK LLP, told Market Intelligence.

"Larger businesses are better able to withstand macroeconomic turbulence and are broadly more sustainable at times of difficulty," Mahmoud said.

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Three megabuyouts with a total value of $17.90 billion were announced in the fourth quarter, a 13.6% drop from the full third quarter.

As of Nov. 27, the transaction value for the quarter grew 69% from $10.59 billion across five transactions in the full fourth quarter of 2022.

Most attractive sectors

The technology, media and telecommunications sector recorded the highest deal value for private equity and venture capital-backed megabuyouts in the region, with three announced deals amounting to $19.61 billion for the year to Nov. 27. The healthcare and financial sectors followed with $13.34 billion and $12.70 billion, respectively.

Businesses in these sectors are attractive from dealmaking and financing perspectives because they have shown resilience through countercyclical growth.

"Rather than the anticipated slowdown occasioned by periods of economic difficulty, these businesses have continued to maintain consistent stability in their finances," said Mahmoud with McDermott Will & Emery, adding that "some of them have continued to grow at above-market rates."

Jonas Fagerlund, a partner at management consulting firm Arthur D. Little, told Market Intelligence that companies in these sectors "have strong long-term underlying drivers."

"A growing elderly population is supporting healthcare and medical technology, while ongoing digitalization in society is driving the technology and financials sectors."

Top transactions

German companies dominated the largest European and UK megabuyouts by private equity and venture capital firms, accounting for four of the top 10 deals during the year to Nov. 27.

Topping the largest buyout list was the proposed acquisition of Norway-based online classifieds site operator Adevinta ASA by General Atlantic Service Co. LP, Permira Advisers Ltd., TCMI Inc. and The Blackstone Group International Partners LLP for $15.11 billion.

The second-largest buyout announced for the year so far was a $12.70 billion deal involving GTCR LLC, which agreed to acquire a 55% stake in London-based payment processing platform WorldPay (UK) Ltd.

Fagerlund expects sectors incorporating software as core components to remain robust.

"We may see pent-up demand for deals that will happen later, supported by the huge amount of dry powder in private equity firms that need to be spent within the life of the fund."

Market outlook

Europe and the UK are expected to continue to see larger transactions over the next 12 months, along with meaningful growth in more middle-market deals.

"As interest rates continue to stabilize, M&A valuation multiples continue to level out and the macroeconomic outlook continues to improve, transactional confidence will return and grow, driving increased deal activity," McDermott Will & Emery's Mahmoud said.