European PE Deal Activity

Deal activity: Deal count has picked up through the first half of 2025, up 2% compared to the same period last year but still down 7% from H2 2024. With geopolitical tensions, investors and analysts alike are forecasting muted European private equity activity for the rest of 2025, with cautious optimism that lower interest rates will support dealmaking H2 2025.
Deal size: Deals between €250 Mn and €1 Bn have proliferated since 2020 and will continue to be a popular segment as investors look for niche players and underwrite deals with more uncertainty, boosting middle market activity.

Source: Dealogic, Deal Region in Europe, Announced/Completed 1/1/2020 through 6/30/2025.
Deal region defined as region of the world the target is either headquartered or has the majority of its managerial operations in.

Sector Highlights

Healthcare / Life Science deal value is gaining market share, +3% compared to the five-year average. Moreover, it is one of the top growing sectors in H1 after financial services and tied with industrials and materials.
Industrials and financial services are the only two sectors that grew in both deal count and value compared to the five-year average. The European Industrials sector remains attractive, supported by tailwinds including sustainability, AI, and defence efforts.

Source: Dealogic, Deal Region in Europe, Announced/Completed through 6/30/2025.
Deal region defined as region of the world the target is either headquartered or has the majority of its managerial operations in.

Geography Highlights

In H1 2025, UK, France, and Germany continue to lead deal activity by number of deals in the region, making up 46% of the market, in line with trends as the top 3 players in the past five years.
Finland, Denmark, and Norway recorded the largest gain in market share from H1 2025, while Germany, Italy, and Spain lost the most market share.

Average Deal Activity by Region in Europe from 2020-2024

Source: Dealogic, Geographic region based on Target HQ, Announced / Completed from 1/1/2020 to 12/31/2024.

Source: Dealogic, Target Region in Europe, Announced / Completed from 12/31/2024 through 6/30/2025.

Source: Dealogic, Target Region in Europe, Announced / Completed from 12/31/2024 through 6/30/2025.

Europe PE-Backed IPO Trends

Activity: In 2025 the IPO market recovered slightly from 2022-2023 lows caused by economic uncertainty after the pandemic. Whilst the number of IPOs of PE-backed European companies remains relatively low, 90% of the most recent IPOs have taken place on European exchanges and there is some optimism that European markets will be more favourable towards IPOs at the end of the year.

Source: Dealogic, Target HQ Region in Europe, includes IPOs listed in all exchanges. Announced / Completed from 1/1/2025 through 6/30/2025. USD to Euros exchange rate as of 7/8/2025.

Fundraising Trends

Fundraising: the number of global funds closed in H1 has been the lowest in the past 4 years given global macroeconomic uncertainty, though aggregate capital raised increased HoH. Similarly, the number of funds with a regional focus on European follows the downward trend in number of funds closed at -25% HoH but with total value raised up 84% HoH.
Funds in the market: In H1 2025, infrastructure and buyout funds have been the main strategy. Infrastructure assets now take up approximately 50% of capital raised.

Note: Preqin, all PE strategies excluding VC, all regions. USD to Euros exchange rate as of 7/8/2025.

 

Source: Preqin, all PE strategies excluding VC, primary region focus Europe and Multi region (Global).

Secondaries

Growth in Global Secondaries with exposure to Europe: Secondaries fundraising in 2024 and H1 2025 has exhibited explosive growth. If the pace continues, 2025 is set to be a record-breaking year. Europe is now home to the largest secondary fund, Ardian’s ASF IX, which raised ~€29 Bn.
Positive fundraising in the first half of 2025 points to a sustained trend that secondaries have become a popular liquidity solution for both GPs and LPs globally.
Looking ahead for the rest of 2025, Investec reports that GPs in the UK and Europe are more likely to use continuation vehicles as an exit alternative in the next 24 months as more traditional strategies, such as IPOs, remain hindered by uncertainty.

Source: Preqin, PE secondaries strategies, primary region focus Europe and Multi Region. USD to Euros exchange rate as of 7/8/2025.

Source: Preqin, PE secondaries strategies, primary region focus Europe and Multi Region.

Source: William Blair Secondary Investor Survey March 2025. USD to Euros exchange rate as of 7/8/2025.

A Look Ahead

Mixed Performance in H1 and Gradual Recovery Ahead: European private equity markets showed varied results in the first half of 2025. Fundraising and PE deal activity were relatively muted due to ongoing geopolitical tensions and unpredictable policy changes. However, there were pockets of resilience in defence, AI, and secondaries. Looking ahead to the rest of 2025 and into 2026, a slow recovery is expected, helped by lower interest rates, higher defence spending, and better overall market conditions.

Sector Highlights

Significant Increase in Defence Spending: Following Trump administration’s pressure, NATO members committed increasing defence expenditure up to 5% of GDP by 2035, compared to the previous 2% target. Germany’s Zeitenwende, allocating € 100 Bn in new defence investment, is an example of a pan-European effort to take defence in its own hands as the U.S. becomes more isolationist. This trend is expected to feed the growing appetite of private equity to invest in defence related businesses.
Digital Transformation and AI: More than 20 international key capital allocators, including Blackstone, CVC, EQT, General Catalyst, Insight, KKR, Lightspeed, and Warburg Pincus earmarked around €150 Bn for AI-related opportunities in Europe over the next five years. NVIDIA’s partnership with French startup Mistral AI is a positive example of how Europe is and will become a strong player in the AI space.
Sustainability and Industrials: Preqin reports that Europe is now the largest ESG market with European ESG funds now managing over €600 Bn as the EU in particular aims to lead the charge in decarbonisation. The industrials sector will benefit from this goal and will be expected to grow steadily.

Regulatory Environment

Fiscal and Monetary Support: Inflation in the Eurozone is close to the ECB target of 2% and the ECB’s vigorous reductions in interest should boost private equity activity. Thus, some forecasters are upgrading their expectations for the Eurozone economy.
Pension Fund Integration: Bills under review such as UK’s Pension Schemes Bill could allow pension schemes to invest in private assets like private equity, debt, and venture capital which may boost demand for European PE as pension funds seek alternatives to diversify their portfolios.
Carried Interest Reform: Each country is currently deciding the details of this reform. In the UK for example, from April 6th, 2025, the capital gains tax rate on carried interest will increase from 28% to 32%. The reform’s broader implications in the region include a potential shift in fund structures to accommodate tax changes, increased focus on cost efficiency to offset higher tax rates, and regional disparities in policy execution between countries as they work to finalize details of their respective reforms.