By most measures, the second quarter of 2020 is a quarter to lightly forget. Global economies shut their doors in fear of what the coronavirus meant for human health. Deal making in the private equity/venture capital (PE/VC) universe slowed as well, as firms put off potential funding steams and exit strategies.
That slowdown changed on a dime when economies began opening up in the third quarter of 2020. Here’s a look at how private equity/venture capital deal making faired in the third quarter this year.
The Backdrop
Up first is the backdrop. As shown, PE deal activity through the first three quarters of 2020 is down sharply from previous years. A similar trend holds for deal value.
For the entire 2019 year, the number of deals reached 4,202, down slightly from the decade high of 4,213 in 2018. Deal value also leveled off in 2019 across Europe, declining slightly from €477.8 billion in 2018 to €459.9 billion in 2019.
Through the first nine months of 2020, deal volume sits at €316.3 billion on 2,791 deals. Unsurprisingly, both figures are down from the full 2019 year. This picture, though, masked the zoom of a comeback PE and VC activity has seen since economies began to open up again in the third quarter of 2020.
Since flattening in the second quarter, the number of PE deals is up 33% in the third quarter of 2020 compared to the second quarter.
Deal Size
One way to view how healthy the PE and VC investor market is doing is the median PE deal size. That view follows below. Interestingly, deal size has held up fairly well at €22.8 million. This is the second highest on record, behind 2019’s all-time high of €29.0 million.
Interestingly, although median deal size is down somewhat from the 2019 heydays, but still strong by historical measures, the number of PE deals under €25 million continues to slow down – likely reflecting the increasing value of deals. The number of deals under €25 million, as measured by a 4-quarter rolling average, is just about 1,500 – not grand, but not collapsing either.
Deals by Region
Lastly, we take a view of PE deals by region. The leader in the number of deals by region is the UK and Ireland, followed by DACH and France and Benelux. Smaller number of deals also occurred in Southern Europe, the Nordic Region, Central & Eastern Europe, and Israel.
Summing Up
In a somewhat surprising fashion, when economies began opening up in the third quarter of 2020, European deal making zoomed ahead. Presuming no further shutdowns to end 2020, and the 2020 years as a whole may turn out to be fairly healthy for the private equity/venture capital universe. Fingers crossed.
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