By Emma-Victoria Farr and Andres Gonzalez
LONDON (Reuters) – Private equity funds in Europe, even though flush with cash, are thinking twice about buying businesses that could be difficult to sell and carefully working through their exit plans before making more acquisitions, bankers and investors said.
In one example, Brookfield walked away from making a binding offer for Spanish waste disposal firm Urbaser due to concerns over exit options, one source familiar with its strategy said. One reason was that it could eventually be too big to sell on, the person said.
A Brookfield spokesperson declined to comment. Urbaser owner Platinum Equity did not respond to a request for comment.
“In the last cycle, funds have done very well on the entry, very well on the execution, but the exit, that has been more difficult,” said Nestor Paz-Galindo, UBS head of EMEA global banking and global co-head of M&A.
Big transactions will still take place in Europe, Paz-Galindo said, but are likely to be the preserve of fewer funds.
Bankers told Reuters they expect 2025 will see private equity funds under pressure to not only deploy record levels of unspent capital, but also to sell assets that they have been owning for longer than they have traditionally.
In Europe, the resale of companies from one financial investor to the next is proving difficult, and auctions of private equity-backed companies have seen fewer bidders, bankers and investors said, with sale processes also taking longer.
“There is concern that some assets are just simply too big, and we’re seeing sponsors consider divesting divisions or stakes to reduce the size,” Stephen Pick, Barclays’ head of M&A in EMEA, said of how some firms are attempting to secure an exit.
Meanwhile, the U.S. private equity market has been more active and is poised to see some larger deals in 2025 as financial sponsors face increasing pressure to return liquidity to their limited partners.
A regulatory environment anticipated to be more business-friendly under the second administration of President-elect Donald Trump is also expected to drive a surge in larger transactions, bankers and lawyers said.
BACKLOG
Total deal values involving financial sponsors in Europe, Middle East and Africa (EMEA) so far this year have reached $297 billion, up 23% on 2023 but still far off the peak of $509 billion in 2021, Dealogic data shows.
The value of shares sold on the public markets by all investors, including private equity, were only $146 billion so far this year across the region, down from $294 billion in 2021, Dealogic data provided by JP Morgan shows.
