Private Equity
Snapshot
May 2021

It has been a strong start to 2021 as private equity firms in Europe deploy capital and position themselves for a return to normal and economic recovery from the effects of the pandemic. New Pitchbook data shows that first quarter deal activity hit a record €159 billion, up 28.5% on 2020, while the number of transactions increased by 80% to almost 2,000¹.

The figures also indicate a pick-up in smaller deal sizes, partly driven by bolt-on deals, as private equity-backed portfolio companies look for acquisition targets to boost their reach and build national and European platforms. There is also continued interest for minority stakes in fast-growing European companies – in sectors including tech and biotech – as sponsors look to tap into later stage start-ups and participate in their expansion ahead of future listings or sales to corporates.

CVC bought a minority stake in Switzerland and Singapore headquartered cybersecurity firm Acronis in a deal valuing the company at over $2.5 billion. Acronis has seen growing demand for its services due the increase in home working, which in turn exposed loopholes in companies’ cybersecurity policies. The funds will help Acronis to expand its portfolio of products, improve its go-to-market initiatives by expanding its partner network, and hire new technical talent for its R&D centres in Europe, Asia and the U.S.² The company is reported to be considering an IPO or sale in the next couple of years to provide an exit to early investors³.

Appetite for Mega Buyouts Remains Strong as Private Equity and SPACs Compete

There has been appetite to conclude larger deals too. Listed Dutch telecoms group KPN rejected two separate offers for the company – one led by KKR and the other by EQT – which could have valued the business at about €18 billion. Valuations are full but demand is strong, with significant pools of dry powder combining with potential co-investment firepower to bid for desirable assets⁴. The recent frenzy of SPAC listings in the U.S. is having an impact on investment activity in Europe as blank cheque vehicles look for potential investments in their target sectors across the continent.

Montes Archimedes Acquisition Corp, a SPAC sponsored by Patient Square Capital, has agreed to merge with Roivant Sciences, a Switzerland-based biopharmaceutical and healthcare technology company⁵. Upon closing of the transaction, Roivant is expected to list on Nasdaq. Since its founding in 2014, Roivant has developed a pipeline of over 40 medicines for a variety of different diseases. The transaction is expected to deliver approximately £433 million of gross proceeds to fund discovery and development programmes and will extend Roivant’s operating runway through mid-2024⁶. The deal comprises a roughly £142 million common stock private investment in public equity (PIPE) from institutional and strategic investors including Fidelity, Palantir Technologies and SB Management, a subsidiary of SoftBank.

Corporates Target Private Equity and Venture Capital Companies

After record activity in the first quarter, there is anecdotal evidence that private equity investment is normalising. Attractive assets still draw large crowds of sponsors to auction processes, but private equity firms appear ready to pause for breath as the recovery unfolds in Europe and businesses prepare for further unlocking. Nonetheless, exit markets are robust as European and international corporates – with cash reserves and growing confidence to invest those resources – look for transformational M&A and private equity and venture capital backed businesses that will take them into new markets.

Following an initial investment in May last year, NeoGenomics, a leading provider of cancer genetic testing services and global oncology contract research services, agreed to acquire the remaining majority stake in Inivata Limited from a group of investors⁷. Inivata will remain a separate business division within NeoGeonomics and focus on the continued development of its promising RaDaR minimal residual disease assay, an area estimated to have a total addressable market in excess of £10 billion⁸.

Stockholm-listed digital consultancy and solutions firm Knowit agreed to acquire Cybercom Intressenter from a group of investors including private equity, giving it a foothold in the growing cybersecurity and cloud services market⁹. Through the deal, Knowit will create a fourth business area (Knowit Connectivity), which will focus on meeting the needs of the industrial, tech and telecom sectors¹⁰. With Knowit’s strong position in Norway and Cybercom’s foothold in Finland, the acquisition is expected to create a Nordic leader for digital solutions.

Buy-and-Build Platforms Attract Large Strategic Buyers

While there has been an increase in small deal sizes since the start of the year, buy-and-build strategies can result in large platforms that attract large strategic buyers and institutional investors. Sponsors can typically buy smaller assets at lower multiples in Europe to assemble a group of assets that can command a higher multiple at exit, while also using operational experience and economies of scale to boost revenues and profits for the company.

Fastighets AB Balder, a listed Swedish property company, agreed to acquire Asset Buyout Partners, a portfolio company of HitecVision, a Norwegian private equity firm focused on the European energy sector¹¹.The acquisition includes 106 properties in Norway’s oil towns – Bergen, Stavanger, Kristiansund and Hammerfest. Since creating Asset Buyout Partners in 2016, HitecVision has used its strength in the oil and gas industry to find assets and tenants for its properties, creating a business with rental income that is attractive to a large regional real estate player.