Add-on deals dominate the European market
After several years in the doldrums, add-on deals are once again dominating the private equity (PE) buyout market in Europe. The sector has accounted for more than 50% of asset control deals over the past 10 years.
In 2024, there were 4,150 add-on deals in the region. This represents an increase of 8% compared to 2023. In the current year, the share of add-on deals was 66.7%. Such a figure indicates continued strong activity in the sector.
PitchBook analyst Charlie Farber notes a rise in such deals from European GPs. They are increasingly favouring a buy-and-build strategy. In this approach, segment leaders are created with the help of a platform company. The platform company then implements the roll-up strategy.
According to the data, the average number of add-on deals was around 3,406 per year from 2019 to 2023. In 2024, this number grew by 22%. Meanwhile, the share of add-on deals in the European market is 74% lower than in the US. This points to regional differences in market structure.
The limiting factor for Europe is high fragmentation and a complex regulatory landscape. All of this makes scalability difficult. Analysts expect that lower interest rates will be an incentive to increase the number of deals on the PitchBook platform. This, in turn, will reduce the number of add-on deals.
PE market overview
The European private equity (PE) market was in a volatile state between 2022 and 2023. However, there have been signs of recovery in recent months. Key factors contributing to this have been:
– an increase in the number of deals;
– a rise in the number of exits from investments;
– falling financing costs.
However, analysts at McKinsey note that the market still faces a number of difficulties. Investors are cautious and reluctant to take action. Moreover, the sector is still in a state of flux due to some factors.
In 2024, the total value of transactions in the European PE market reached USD 2 trillion. This represents a 14% increase over the previous period. This made 2024 the third most active year in the history of the sector.
Large deals worth more than USD 500 million are showing good momentum. They grew by 37%, indicating increased investor demand. This, in turn, is due to lower borrowing rates. There is also a return of confidence among large investors after a period of market instability.
Beyond the add-on deals, the region has also seen an increase in P2P agreements. Their number increased by 65% over the year, suggesting an increased interest in buying out public companies. There has also been increased activity from private investors who were previously unable to reinvest.
