Private equity-backed exits will remain challenging this year amid public equity volatility, Nalin Patel, lead EMEA private capital analyst at PitchBook, told IPE, commenting on the latest Germany Market Snapshot published by the research firm.
Private equity exits picked up in the fourth quarter of last year, for a value totalling €13bn, the highest level recorded since 2021 (€13.3bn), according to PitchBook’s data. The largest private equity-backed exit in volume was the IPO of shoe maker Birkenstock, valued at €7.67bn, the report said.
Birkenstock’s share price development this year could give an idea on how investors and management teams approach exit opportunities via public markets for companies based in Germany, PitchBook’s report disclosed.
“Early signs of cooling inflation and less aggressive interest rate regimes could lead to improved exit prospects in 2024,” Patel added.
Investors believe that private equity transactions will pick up again in the second half of the year, as pension funds look for exits to pump up liquidity to reinvest in the asset class.
Deal activity in 2023 was flat or down
Private equity and venture capital deal activity was either flat or down in 2023, reflective of the slower dealmaking environment across Europe, Patel said.
According to the report, venture capital deal activity closed 2023 with deals worth €1.7bn, consistent on a quarterly basis, meaning that the dealmaking environment remained healthy. Private equity deal values dipped by 45.4% quarter-on- quarter in Q4 2023 to €9.6bn, the lowest value since Q3 2020, it added.
Increasing cost of capital, weaker growth forecasts, and less abundantly available capital to deploy into private equity and venture capital markets have hampered capital flows, Patel said.
Private equity fundraising in Germany has progressed in the last part of 2023 with capital raised totalling €3.5bn, above €1.8bn raised in 2022, but below €4bn and €5.1bn collected in 2021 and 2020, PitchBook’s figures show.
“Fundraising was in line with recent yearly totals for both private equity and venture capital. The IPO of Birkenstock was the major liquidity event that drove up the total,” Patel said.
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