European private equity deals plummeted to a seven-year low in the second quarter of this year as risk appetite was quashed by the coronavirus pandemic, according to a market study.
Only 650 transactions totalling €79.8 billion were closed over the three months up to June end, a year-on-year decrease of over 30% - a stark contrast to the high levels of activity in 2019.
The research by Seattle-based fintech PitchBook found that lenders concentrated on existing loans, but leveraged lending activity also took a nosedive amidst the unprecedented volatility. Sellers, on the other hand, were predominantly focused on exit plans as they grappled with uncertainty.
General partners either paused or completely cancelled transactions in order to mitigate damage to portfolios, the research firm said.
The UK and Ireland saw the biggest decline in deals at 62.3% year-on-year, with Covid-19 largely to blame.
Despite the generally conservative approach to PE investing in the new paradigm, Pitchbook analyst Dominick Mondesir said he expects deal activity to pick up again over the coming quarters.
Managers have nearly €240 billion in dry powder ready to be deployed “aggressively but wisely”, Mondesir stated.
“With the virus more contained in Europe compared to other regions and the continent reopening in the second half of the year—albeit with localized lockdowns/outbreaks— confidence should gradually revive in European consumers and businesses,” Mondesir added.
© 2020 funds europe