European private equity and venture capital entry volume dropped to a five-year low in the first half of 2020 as managers turned away from deal-making to focus on their existing portfolios in the wake of the coronavirus outbreak.
The number of deals announced dropped 13% compared with the first half of 2019 to 2,133, according to S&P Global Market Intelligence data. But while announced gross transaction value dipped by 9% to €63.65 billion over the period, it remained higher than valuations for the first half of 2016 through to 2018 due to a handful of large deals.
A string of mega-deals were announced in the first quarter. These included Advent International Corp. and Cinven Ltd.'s announced acquisition of thyssenkrupp AG's elevator business for €17.2 billion. The deal, which closed July 31, was the largest private equity buyout in Europe in a decade, according to S&P Global Market Intelligence data.
But including add on activity in first-half figures changes the picture. Aggregate valuations for entries and add ons plummeted 43% to $133.45 billion in the six months to June 30. Deal volume also fell to 5,308 announced entry and add ons from 6,245 deals in the same 2019 period.
Second-quarter entries fell by 11% from 1,130 in the first quarter to 1,003. Add on figures slipped by 28% in the first quarter from 605 deals to 437 as the coronavirus pandemic took hold, and governments imposed lockdowns.
The U.K. was the busiest geography for entry deal-making in the first half, with 576 deals totaling €18.1 billion. Germany saw the largest combined gross transaction value, sitting at €22.9 billion across 306 deals, helped along by the thyssenkrupp deal. France was the second busiest geography for deal-making with 399 deals announced worth a combined €4.37 billion.
Fundraising also slowed in the second quarter as the coronavirus pandemic stalled meetings between managers and limited partners, which went virtual, while uncertainty increased due diligence questioning. In total, 43 funds were closed by Europe-headquartered managers in the second quarter of 2020, down from 68 in the first quarter, according to Preqin data.
Despite the smaller number of fund closes, the aggregate amount raised totaled $39.45 billion, much more than the $19.58 raised in the first quarter of 2020. The second-quarter figure was bolstered by Ardian's mammoth $19 billion raise for its eighth secondaries fund.
CVC Capital Partners Ltd. also closed on its $4.5 billion hard cap for its fifth Asia Pacific-focused vehicle in the quarter, with IK Investment Partners closing on the third-largest fund, its $3.1 billion ninth mid-cap fund.
CVC is seeking to raise $19.8 billion for its eighth flagship fund, the largest Europe-based fund in market by target size. EQT AB (publ) is raising its ninth flagship fund with a target size of $16.2 billion, followed by Apax Partners LLP, which is looking to raise $10.5 billion for its 10th flagship, the third-largest European fund in the market.
