European Private
Equity M&A:

April Market Snapshot

Only one month ago, we noted the continued strength of private equity activity in early 2020, which culminated in the agreement of Europe’s largest leverage buyout deal – the €17.2bn Advent and Cinven-led purchase of Thyssenkrupp’s elevators division in February. In the past month, however, new investment activity has been forced to take a back seat to portfolio management, a topic we discuss in more detail in our piece on crisis support measures for portfolio companies.

For recently agreed but yet-to-complete deals, private equity firms and co-investors will be poring over the details. Every investment will be analysed and stress-tested again for threats. As long-term investors, most sponsors will have considered worst-case scenarios and be confident in their ability to add value through operational change, as well as companies’ fundamental strengths over the long run. However, where there are new issues that undermine the investment thesis, they will be looking at their agreements and the potential to renegotiate terms, or even walk away – although given the prevalence of seller-friendly terms in the European market leading up to the crisis, buyers and their lawyers will have to get creative.

Such moves, however, could have significant reputational repercussions for sponsors, and we would only expect to see these steps taken in very exceptional circumstances. We have explored some relevant legal issues under UK, French and New York law.

Investigating New Opportunities

New buyout activity has been limited in the past month in Europe, and large-scale auction sales look set to remain stalled or parked in the near term in favour of opportunistic, bilaterally negotiated deals. That said, activity could remain more robust in sectors less impacted by the downturn, or which have attractive long-term dynamics that could benefit from changes to consumption and working patterns or evolving priorities – such as TMT, healthcare and infrastructure. We would also expect to see other forms of more opportunistic private equity investment coming to the fore.

As the economic effects of the lockdown continue to wash through markets, distressed and special situations investors are preparing for potential investments across a wide range of sectors, allowing them to tap into market dislocation in order to provide their investors with much-needed returns.

Sponsors are also looking closely at deals that will enable them to deploy dry powder quickly and at scale. These include PIPEs (private investment in public equity) and P2Ps (public-to-private).


A more common feature of US equity markets, where PIPE activity is reported to have hit €17bn already this year and could accelerate towards the 2009 high of $120bn, similarly structured investments are likely to surge in Europe also. In recent weeks, UK companies including retailers WHSmith, Asos, and online classifieds group Autotrader have tapped equity capital markets for finances, underlining public companies’ demand for emergency funding. Private equity firms will be putting themselves forward as potential investors, providing not only capital, but also operational expertise to help public companies through the crisis.


Private equity firms have been exploring P2Ps as listed company valuations and earnings come under pressure and sponsors seek to capitalise on shareholders’ potential needs for liquidity. European P2P activity rose 14% to €34.5bn last year, according to Mergermarket data, driven by deals in the UK including Advent’s takeover of defence and aerospace company Cobham and Thoma Bravo’s take-private of software group Sophos.

However, the successful execution of P2Ps in the current environment faces a number of headwinds, including the availability of sufficient leverage – although large companies may be able to access the US high-yield market even when European financing is more difficult – as challenges in underwriting a stable, long-term business plan are mounting and potential opposition from EU and national regulators may hinder cross-border deals (see our note on the European Commission’s latest guidance on foreign investment screening here).

It may be that TA Associates’-backed MRI Software’s recently announced take-private of Castleton Technology plc is indicative of the P2Ps that might be prevalent in the near-term: taking place at portfolio company level where there is an existing, deep understanding of the business and challenges faced by the target, as sponsors shy away from taking on businesses in new sectors with no portfolio synergy.

Michael J. Preston

T: +44 20 7614 2255

Gabriele Antonazzo

T: +44 20 7614 2353

Michael James

T: +44 20 7614 2219