Preqin’s Buyout Deals Analyst online service has recorded 986 European private equity-backed buyout deals so far this year, with an aggregate value of €65bn. Germany, Europe’s largest economy by GDP, accounted for roughly 10% of the number (95) and aggregate value (€6.2bn) of European deals in 2014 YTD. In terms of the number of transactions, German deals have accounted for a fairly constant proportion of the European market share since 2006, ranging from 9% to 11% of the total number of deals. However, the proportion of the aggregate value of deals accounted for by German transactions has fluctuated from the low of 6% in 2010 to the high of 20% in 2013. In 2014 YTD, this figure has experienced a substantial drop of 10 percentage points on last year’s proportion. In raw values, this equates to a 50% reduction from €12bn in 2013 to €6bn in 2014 YTD.
There are two main explanations for this sharp drop in aggregate deal value from that of 2013. Last year, three out of the top five deals in Europe took place in Germany: the buyout of Springer SBM by BC Partners for €3.3bn, the acquisition of ista by CPP Investment Board and CVC Capital Partners for €3.1bn, and the buyout of Scout24 by Hellman & Friedman for €1.5bn (the largest, second largest and fifth largest European deals in 2013, respectively). Such large transactions have been missing in 2014, with the largest private equity-backed buyout deal completed in Germany so far this year being the acquisition of GEA Heat Exchangers by Triton for €1.3bn.
Additionally, the second half of 2014 YTD has witnessed the lowest number of deals since H2 2009 and the lowest aggregate value since H1 2009. This drop could be explained by the disappointing economic data in Q2 and Q3 of this year. According to OECD statistics, Germany’s GDP growth rate in Q2 was negative and Q3 displayed only small growth at 0.1%. As a result, the German DAX fell by about 15% between September and October, while the private equity market decreased substantially, with only 19 deals announced in Q3 compared to 35 in Q2.
The largest number of deals in Europe and Germany occur in the industrials sector, although the proportions differ. Thirty-seven percent of German deals have taken place in this sector in 2014 YTD, against 23% of the European total. Conversely, the number of investments in the information technology and healthcare sectors in Europe supersedes the market share that those industries hold in Germany. Information technology has this year accounted for 16% of the number of European deals and 12% of German deals, while healthcare represented 10% of European and 6% of German transactions.