Private Equity Trend Report 2023

The study at a glance

PE transactions in DACH decline particularly sharply

The study recorded a total of 2544 transactions with private equity participation in Europe in 2022. Compared to the previous year, this is a decline of 19 percent. The deal value of all transactions was 208.6 billion. This is around 4 percent less than the previous year. 

Germany, Austria and Switzerland were hit particularly hard by the decline in PE transactions: in 2022, a total of 437 PE transactions took place in the DACH region - around a third fewer than in the previous year (679). The plunge was even more noticeable in the total value of the deals: the value fell by 52 percent to 18.1 billion euros. 

The total value of private equity deals fell more sharply than the number of transactions in 2022. The reason: in view of the difficult macroeconomic environments and the banks’ unwillingness to provide financing, PE investors tended to focus on the existing portfolio in order to drive value generation.

Interest in the technology sector is declining

Unlike in previous years, European PE investors weren’t most interested in the Technology, Media and Telecommunications (TMT) sector, but rather in the Industrial Production sector. This accounted for a total of 36 percent of all PE deals. TMT and consumer goods were the second strongest sectors, 24 percent of PE transactions took place in each of these sectors. 

However, the study shows shifts in the focus of investors: the pandemic-related high interest in technology companies is dying down; instead, investors are increasingly setting their sights on targets from the energy, logistics and infrastructure sectors. Targets from the consumer goods sector are also becoming increasingly popular: 40 percent of respondents want to invest in this sector in the next two to three years.

Germany defends 3rd place

The UK and Ireland lost their leading position in the European PE market for the first time: PE investors from France were involved in almost every fourth transaction (23 percent) followed by investors from the UK and Ireland - with 21 percent. Germany defended its position as the third most active takeover market: 13 percent of all transactions - three percent less than the previous year - took place in Germany.

93 percent of investors who have already made investments in Germany intend to continue doing so. However only 42 percent want to increase their investment amount: in 2021, 80 percent were still planning to do so. 

However, Germany is likely to remain attractive for investors in the future: 83 percent of respondents believe that Germany is a good location for PE activities. When asked which region will become more attractive for PE investments in the next five years, Germany lands in third place with 68 percent of mentions, behind the United Kingdom (81 percent) and the USA (76 percent).

Digitalisation and sustainability as key value drivers

99 percent want to invest in digitisation

For the overwhelming majority of respondents, digitisation is a central lever for value creation: 99 percent want to invest further in digitisation in the coming year. Data analyses in particular play an important role: 78 percent plan to put money into this area. Data analyses are often used for due diligence and valuation of companies, but increasingly also for identifying potential target companies. 61 percent of respondents report that they already rely on data analytics to find attractive acquisition targets; by 2023, a good three-quarters of respondents plan to do so.

ESG-Guidelines have become established

There is a consensus on another issue: without exception, all respondents say they have a responsible investment policy in place and the tools to implement it. In 2021, this share was only 77 percent. Almost two-thirds (64 percent) already use ESG-specific KPIs for all their portfolio companies. These include, for example, the carbon footprint and water consumption or key figures on diversity and inclusion. In 2021, this share was only 17 percent. 

At the same time, there is a growing conviction that a focus on environmental, social and governance issues is also beneficial to a company’s financial performance: 71 percent agree with the statement that the ROI of ESG exceeds the costs; in the previous year only 36 percent of respondents had this opinion.

Methodology

PwC surveyed 250 European partners and managing directors in private equity firms in the fourth quarter of 2022 and the first quarter of 2023, with each participating firm having at least 250 million euros in assets under management. Around 13 percent of the respondents were from Germany.