Private equity activity in the first half of the year has been relatively subdued as the economic environment remains persistently uncertain.

However, a deeper look paints a much more complex picture. 

For example, recent data from Europe suggests fundraising could be back on pace. Certain private market subsegments as well are showing levels of robustness, such as secondaries, while some industry experts believe that private credit is even having a “golden moment”.

Below, we present our five takeaways from the first six months of the year, as well as the opportunities that lie ahead. 

European fundraising surprises on the upside

European private equity firms raised €49 billion in the first half of the year, a significant amount when contrasted with the €68 billion raised throughout the entire 2022, according to PitchBook’s Q2 2023 European PE Breakdown.¹

This near-record fundraising tear is being driven by the growing prominence of megafunds with over $5 billion of raised capital as investors flock to more established managers with stronger track records. 

This trend is epitomised by two massive fundraises in 2023 — Permira’s eighth flagship fund that secured €16.7 billion in commitments², and CVC Capital Partners closing its ninth flagship fund on €26 billion, setting a new milestone as the largest buyout fundraise in history.³

Source: PitchBook, 2023

Appetite for add-ons is growing 

Dealmakers in private equity are still largely sitting on the sidelines. Managers at buyout funds closed 864 deals globally in the first half, signalling a 29% year-on-year decline, according to Bain & Company.⁴ Measured in US dollar value, the drop is even steeper at 58% compared to the same period last year. This dwindling activity largely stems from the current price expectation mismatch between buyers and sellers, coupled with tougher financing conditions.

Yet, today’s appetite — or lack thereof — doesn’t permeate all corners of the industry. While megadeals may be languishing, there is significant interest in add-on acquisitions in the mid-market space. 

These deals see private equity funds purchase smaller-sized businesses, typically without using leverage, and fold them into one of their existing portfolio companies to extend product lines or capture market share. According to PitchBook, add-ons made up almost 55% of all deal value in Europe in the first half of the year, while in the US, this share is even greater.⁵

Source: PitchBook, 2023

Breaking things down by sector also highlights how a broad-brush approach doesn’t tell the whole story. Financial services in the European market, for example, stood out as the “only sector on track to pace above its 2022 levels of €48.4 billion”.⁶ One of such deals was KKR’s $215 million investment in Swedish wealth management company Söderberg & partners.⁷ Conversely, the healthcare sector trails both in Europe and in the US.