European Private Equity Outlook 2023

By Martin Weissbart and Christof Huth

The European Private Equity Outlook 2023 – the 14th in a series launched by Roland Berger in 2010 – provides insights into what experts working in the field of private equity (PE) anticipate for different countries and regions, and which factors they think will be relevant in the coming year. Key findings of the Roland Berger study include that almost 60% of private equity experts expect the financing environment to ease in the medium term and investment activity to pick up. Two sectors – pharmaceuticals & healthcare, and technology, software & digital solutions – remain the most attractive target industries for M&A transactions with PE involvement. Mid-cap and small-cap are considered the most promising asset classes.

A varied picture

As in previous years, the outlook for M&A transactions with PE involvement differs between different European countries and regions. While insiders are expecting to see the strongest growth in the Nordics and Spain & Portugal, they also predict relatively positive developments in Germany, Austria and Switzerland. However, they are less optimistic about Italy, Central and Eastern Europe (CEE) and the United Kingdom.

Respondents believe that the key factor influencing PE transactions in 2023 is the availability of debt financing and the overall economic situation. Almost 60 percent also cite rising energy costs and consumer confidence, which is mainly driven by uncertainty over inflation . They are less worried about topics such as the COVID-19 or competition from strategic investors – major issues in last year's study.

Sources of deals

According to the survey, almost 70 percent of PE experts view primary investment opportunities (majority and minority) as the most important source of attractive targets in 2023. The reason is that investments such as these offer considerable potential for value creation – a top priority for PE firms at the moment. Taking listed companies private shows the strongest increase in attractiveness, moving to the top of the ranking, while secondary buyouts are now at the bottom of the ranking.

Other key findings

Almost three-quarters of PE experts believe that valuation multiples are currently overvalued, especially in pharmaceuticals & healthcare and technology, software & digital solutions. However, the number of respondents that believe assets are fairly valued has increased strongly, from just eight percent in 2022 to 21 percent today. Overall, a slight drop in multiples is expected for 2023.

PE activity in 2023 will likely focus on fundraising and divesting existing investments. More than three-quarters of PE professionals expect competition for fundraising to become even more intense in 2023.

Investors are also constantly on the lookout for additional ways to create value, other than just by buying low and selling high. Most PE professionals believe that value creation initiatives in the portfolio will play an important role over the coming five years. Key measures for creating value in 2023 will be environmental, social and governance (ESG) factors, cycle resilience, and digitalization. Indeed, respondents expect the role of ESG in due diligence and target selection to increase substantially going forward.

Register now to download the full “PE Outlook" including further details of our findings and insights into private equity in 2023.