Mergers and acquisitions reached record levels across the world in 2021. And private equity (PE) activity – including in EMEA – has been equally spectacular. Will it last?

The private equity industry in particular is cash-rich and the biggest players have raised new funds for deals. Private equity firms and limited partners have been drawn to the biggest names in the industry during the pandemic, an effect caused by remote fundraising and the difficulty of performing due diligence on new capital managers – less established investment. Globally, median fund size is at its highest level in a decade and in the first nine months of 2021, around half of all private capital raised was raised by mega funds.

Some of them were US funds with global missions capable of investing across EMEA, such as Hellman & Friedman Capital Partners VI, worth $24.4 billion, the largest fundraising in the year and among the top five private equity funds ever raised. In Europe, Sweden’s EQT Partners managed to raise $18.5 billion for its ninth flagship buyout fund. So, it’s safe to say the big one is back.

How much? And for how long ?

The number of private equity buyouts in EMEA in 2021 increased 56% year-on-year to 2,467 deals, while their aggregate value more than doubled over the same period to €420.2 billion . And four of the ten biggest deals of the year were private equity buyouts.

Private equity activity in EMEA has been driven by some of the same factors as in other regions: interest rates and abundant liquidity, as well as compelling transaction drivers such as digitalization and the energy transition.

Private equity firms are estimated to hold $2.3 billion in dry powder as of October 2021, according to S&P data. Plus, the dry powder is piling up in the hands of the biggest funds: The top 25 private equity firms hold more than half a trillion dollars in unallocated capital, according to S&P.

The hunt for assets

The wall of uninvested capital available to PE indicates that 2022 is primed for similarly outsized deals and that carve-outs are likely to be plentiful for some time to come. On the sell side, European companies are eager to strengthen their capital positions and this, while valuations are still close to all-time highs. PE will be only too happy to oblige.

Although the private equity industry faces headwinds in the form of rate hikes, funding conditions are expected to remain benign by historical standards, and with such firepower at their disposal, equity firms private equity will continue to seek assets aggressively and listed European companies will no doubt continue to attract their attention. Read more here.