Executive Summary
Here is a summary of our key findings:
Entries — Buyout deal activity in 2023 was the lowest it’s been in 6 years (down 32% from peak). Energy & Materials (-18%), Services (-27%) and Industrials (-25%) sectors proved to be more resilient. Q1 2024 data shows promise with the deal count exceeding both 2023 and pre-pandemic levels.
Add-ons — Add-on activity also took a hit in 2023 (down 31% YoY). Despite the decline, the ratio of add-ons to total PE deal activity remains near the decade-high. Close to half (47%) of PE-backed businesses employ a buy-and-build strategy (making at least one acquisition), with assets in Services and Financial Services leading the charge.
Chapter 01: Entries
Overall Trend
Buyout deal activity in 2023 was the lowest it has been in 6 years. Entries were down 32% from their 2021 peak. The slowdown in entries can primarily be attributed to high interest rates which raised borrowing costs for PE sponsors. However, the most recent data from 2024 is starting to show promise.
Chapter 02: Buy-and-Build
Add-on Activity
In line with the overall market, add-on activity in 2023 also took a hit. Deals were down 31% YoY though they still outpaced pre-pandemic levels. By sector, Services accounted for the largest share of add-on deals (39%) followed by TMT (21%) and Industrials (13%).
Chapter 03: Exits
Overall Trend
Exits slowed down meaningfully in 2023 and were down 33% from their 2021 peak. Higher interest rates, macro uncertainty, lower valuations and dormant IPO markets all contributed to this slowdown.
Chapter 04: Portfolio Stats
Revenue Growth
Growth for PE-backed assets is the strongest it has been in years. On average, PE-backed assets grew 18.8% YoY in 2023, well above their pre-pandemic averages. Over the last 5 years, the median PE business had a CAGR of 13.8%.
Methodology
The data for this report comes from Gain.pro.
We define PE-backed entries as those in which a PE firm took a minority or majority stake. We define PE-backed exits as those in which a PE firm sold a minority or majority stake. We exclude any VC rounds from our analysis. Both entries and exits also exclude live and aborted deals.
We only focused our analysis on assets HQ’d in Europe.
We estimate the deal count for the latest quarter based on prior deal history and the percent of deals that are announced or added post quarter close.
For metric calculations, we only included assets that had a hand-curated profile on Gain.pro (10+ hours primary research). Where possible, we have used 2023 metrics. But in cases where numbers are still being reported, we have relied on 2022 metrics.
All EBITDA related metrics such as EBITDA margin and EV/EBITDA multiples exclude Financial Services from calculations.
