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S&P: Private Equity Fundraising In Central And Eastern Europe Up Significantly In 2017

The latest edition of S&P Global's EMEA Private Equity Market Snapshot has been published. Key takeaways from this quarter's report are:

  • Investments to North America doubled in size – attracting 73% of cross-border money, with California taking 62% of the total
  • In the world of Venture Capital (VC), the total capital allocated by EMEA VC firms grew by 98% in 2018 vs. 2017 study periods. Similar to PE investments, majority of EMEA VC money went into North America and Asia, with €2.3bn and €1bn, respectively, in the 2018 study period
  • Private equity fundraising in Central and Eastern Europe (CEE)  saw a significant growth in 2017. According to S&P Global Market Intelligence’s data, buyout funds of local GPs focused on the regional investments raised €1.37bn in capital commitments . This is almost 4x times larger than total capital raised in 2015 and 2016 combined (€340mn)
  • UK Real Estate took the lion’s share of capital from global GPs, with the largest deal of the quarter also in the sector with Blackstone Rea Estate Advisors acquiring Taliesin Property fund Ltd
  • IT regained its lead after losing out to the financial sector in previous quarters
  • Media and Telcos: APAC reigned supreme in 2017, netting half of capital deployed in the year and overshadowing both NA and EMEA. Chinese targets are being acquired in cash, with single GPs claiming minority stake in Chinese media and Telcos
  • 2018: the Year of the Exits? Exit activity in 2018, interestingly, is already 34% of capital realized from global targets compared to the whole of 2017. Such a recent uptake in Media & Telecommunication exits might be explained, to a degree, by strong exit multiples and the industry’s concerns over the sector due to various issues coming to light as a result of the bidding war on Sky Plc
  • In addition to this, Media & Telecommunication sponsor-backed targets are being sold off to, mostly, corporate buyers instead of financial sponsors. This might explain the higher exit multiples, with corporate buyers willing to pay more for valuable targets with readily available cash
  • Recently, sponsors have been more consistently tapping the European high-yield bond market as part of their financing strategy. It is giving them more flexibility when it comes to some of the more storied or niche credits. As large buyout activity heats up in Europe, sponsors are also turning to the bond market to provide subordinated debt on large buyouts where more debt capacity is necessary. Also, with further potential sale dates, call protection is less of an inhibitor for sponsors
  • In the year-to-date to March 23, 59% of sponsored high-yield issuance has been to fund M&A-related activity, while 41% has been used for refinancing. The use of the bond market to finance acquisitions or buyouts has grown in recent years – this €3bn YTD is the highest in the same time frame recorded since LCD began tracking this data in 2006
  • Buoyant European Direct Lending: The European direct lending market has developed rapidly since 2014, with dozens of new managers setting up, including a number of private equity firms that have set up their own lending operations. The market is top-heavy, with the largest five or so managers executing many more direct transactions than the plethora of smaller players
  • On a year-to-date basis to February, sponsored loan volume in Europe is more than double its total from the same period of 2017, as €20bn has been issued so far in 2018, versus €9.1bn last year. M&A-related sponsor volume accounts for 63% of this year’s total. Year-to-date to the end of February sponsored loan volume has made up an impressive 73% of total loan volume at €20bn

Click here for the full report.