Companies completed $143bn of deals outside the US in the first half of this year. This is almost 60% of the world total, according to data compiled by Bloomberg. That’s on track for the highest full-year proportion in almost two decades and about half of this year’s non-US private equity activity came from Europe.
As the US grapples with a pandemic that’s still infecting thousands by the day, the euro strengthened against the dollar on news of a possible economic stimulus package to be rolled out before year’s end.
“This points to the long-term trend for larger deals outside the US as international markets mature,” said Scott Moeller, director of the M&A Research Centre at City, University of London. “It also appears Covid-19 is hitting the US more strongly, which is impacting the ability to do deals despite the large amounts of unspent money available to PE funds.”
Private equity firms started 2020 with more cash on hand than ever, according to data provider Preqin, and capital rose to nearly $1.5trn as of 30 June as dealmaking slowed. Capital-raising also dropped in the second quarter as lockdowns kept investors at home.
With companies taking longer to do business as dealmakers unable to meet in person and companies are going global to adapt. European private equity activity was boosted by the industry’s largest announced deal this year — the €17.2bn ($19.7bn) purchase of Germany-based Thyssenkrupp’s elevator unit by an Advent International and Cinven-led consortium.
European economies seem to be emerging quicker from lockdown and dealmakers are looking for more companies to put units up for sale during the second half. Unilever’s tea unit is up for grabs with Advent, Bain Capital and Blackstone Group among potential suitors, it was reported in June.
Meanwhile, brewing giant Molson Coors Beverage is considering selling about €3bn worth of European assets, in a potential deal that’s expected to attract private equity interest, according to people with knowledge of the matter.
Private equity firm CVC Capital Partners completed a €21.3bn fundraising for its eighth flagship fund, its largest to date.
“Europe experienced the virus earlier and is now coming out of it earlier,” said Ajit Nedungadi (pictured), a managing partner at TA Associates. “This improvement gives financial sponsors more visibility on future earnings and increasing confidence.
While first-half deal flow favours Europe, New York’s buyout giants are still busy. The US still accounts for the lion’s share of private equity transactions with this year’s second-largest deal to date involving a consortium including Global Infrastructure Partners and Brookfield Asset Management Inc. paying $10.1bn for a stake in Abu Dhabi owned pipelines. Blackstone’s purchase of a portfolio of UK student accommodation was also among the top five deals.
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