BY Fraser Tennant
Amid high inflation and interest rates, slowing economic growth, constricted financing markets and uncertain geopolitical conditions, private equity (PE) and venture capital (VC) activity across Europe weakened in the first half of 2023, according to a new report by Invest Europe.
In its ‘Investing in Europe: Private Equity Activity H1 2023’ report, the association reveals that PE and VC capital funds invested €32bn in the first half of 2023, 54 percent lower than 2022’s strong figures and in line with levels last seen in 2016.
Moreover, a total of 3524 companies received backing in the first half, a more moderate 26 percent decline from last year, reflecting smaller average investment sizes across buyouts, growth and VC. Fundraising also weakened from last year’s record level to €33bn. A total of 370 funds raised capital from investors, 15 percent below the average of the last five years. However, VC fundraising was relatively robust and in line with levels recorded in early 2020.
However, while this activity data provides insight into the impact of challenging market conditions on PE and VC in the first half of 2023, a second report released this week, ‘The Insight: State Of The European Private Equity Industry’, in association with global management consultancy Arthur D. Little, gives a more optimistic view of industry expectations over the short and medium term.
“Conditions are as challenging as they have been at any point since the financial crisis,” said Eric de Montgolfier, chief executive of Invest Europe. “Nonetheless, the industry is resilient and adaptable.
“Fund managers are clearly supporting companies through volatile markets while making preparations for the future, not only in terms of increased activity, but also in sustainability,” he continued. “This incldes greener funds for long-term investors, as well as new vehicles that can bring the benefit of PE and VC returns to a wider group of individuals.”