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Increasing European Dry Powder – November 2014

by Matthew Morris

  • 18 Nov 2014
  • PE

As latest figures show Germany narrowly avoiding recession, the economic performance of the Eurozone has been the subject of much media attention. Fears that the region may again suffer tough economic conditions have kept interest rates historically low, while confidence in the region has been subdued. Against a sceptical economic backdrop, this blog will look at the private equity dry powder in the region. 

According to Preqin’s Fund Manager Profiles online service, there are currently record levels of dry powder focused on Europe, as the chart below indicates. As of November 2014, there is an estimated $301bn available in dry powder left to be committed in Europe, with almost half ($145.5bn) of this uncommitted capital coming from buyout vehicles. Europe-focused buyout dry powder is now at its highest level since the end of 2009, when there was almost $167bn in estimated capital not invested.

Europe-focused dry powder has significantly increased in the two years since 2012, in line with the global trend. North America currently has over double the amount of dry powder that Europe has, at $672.9bn, and has experienced a sharp year-on-year increase from 2012. With more capital chasing fewer deals, there could be a risk of fund underperformance, as competition for deals pushes prices higher. In general, European fundraising this year is on track to top the levels seen last year, despite fewer funds closing. As of November 2014, almost the same amount of capital has been raised targeting Europe (€81bn), although this total is from 50 fewer vehicles. 

Hellman & Friedman’s recent mega-buyout fund closure for their eighth fund adds a large sum to the global dry powder figure, which as of November 2014 stands at an estimated $1.2tn. CVC Capital Partners and Ardian are the largest Europe-based firms in terms of estimated dry powder available to them. The UK-headquartered CVC has approximately $19.8bn available to deploy in investments, with France-based Ardian close behind on $18.1bn.

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