With so much happening in Europe, from the election of reformist Emmanuel Macron as President of France last month, to “hard-Brexiter” Prime Minister Theresa May’s failure to win a majority for her Conservative Party in the U.K. last week, we thought it an opportune time to zero in on Europe and the most popular investable European fundraisings in Palico’s online private equity fund marketplace.
As the Financial Times recently put it, “eurozone recovery has become the surprise economic story of 2017.” Although little heralded, the eurozone has expanded 5.1 percent in two-and-a-half years, versus 4.6 percent for the U.S. And with 15 quarters of consecutive growth under its belt, the single currency area grew twice as fast as the U.S. in the first three months of 2017. The consensus forecast for eurozone growth in 2017 has risen to 1.7 percent from less than 1.4 percent last summer. Unemployment has fallen to the single digits – 9.3 percent – and eurozone growth rate divergence is at its lowest level in two decades; the Italian economy grew 0.4 percent in the first three months of 2017 and Portugal’s spiked 1 percent. There’s pro-investment political momentum, with protectionist sentiment suffering a series of blows, culminating in the victory of EU champion Macron in France, and the U.K. election setback for May’s strategy of a radical U.K. break with the EU. Europe is also relatively cheap. The average private equity purchase price stands at 8.3 times corporate cash flow versus 8.8 in 2014 and a current multiple of 10.9 in the U.S. The euro and the pound are also close to 10-year lows to the dollar.
|French Focused Fundraisings are Popular|
Out of the seven most popular European fundraisings in Palico’s private equity marketplace, ranked by data room requests over the past three months, it’s noteworthy that two focus on France. France-focused private equity funds have seen their popularity rise since the May 7 election of reformist French President Emmanuel Macron. With polls indicating a parliamentary majority for Macron’s La Republique En Marche party after the second and final round of France’s legislative elections this Sunday, investor interest in France-focused funds is likely to broaden.
|U.K. Fundraisings Stand Out|
A bit more surprising than investor desire to invest in Palico-listed fundraisings centering on France, is the popularity of U.K.-focused funds – there are also two of these among the seven most in-demand fundraisings. Even when the prospect of a hard Brexit loomed large on the horizon, the U.K. was seen as a highly promising market for healthcare investment, the speciality of the second most in-demand European fundraising on Palico, RDCP Healthcare Opportunities II. Meanwhile, outside of Silicon Valley, London possesses one of the world’s most developed high-tech investment ecosystems – the city is the hunting ground of predilection for Isomer Capital, sponsor of the seventh most popular fundraising – an incumbent position with staying power, even in the event of a hard Brexit. With a soft Brexit, or even no Brexit now a credible possibility, U.K.-focused funds are likely to become more popular.
|No Buyout Funds Among Europe’s Most In Demand|
None of the seven most popular European fundraisings involve a strategy focused on leveraged buyouts – a testament to the growing diversity of private equity. The long-term activist investment style that defines PE encompasses all asset types from mezzanine debt instruments – a speciality of the third most popular European fundraising, Rockerway (a vehicle focused on financing Europe’s media and entertainment industry) – to agribusiness, the speciality of the sixth most popular European-focused fundraising. The sponsor of the latter fund, JB Equity, focuses on technology transfers between Europe and the world’s emerging markets.
|Beyond Fundraising, Europe’s Popularity Extends to Private Equity Secondaries|
Invest Europe, the leading trade organization for private equity in Europe, recently noted that European primary fundraising hit an eight-year high in 2016. Some €74.5 billion was committed by investors to European funds, representing a striking 37 percent year-on-year increase. Meanwhile, Real Deals, citing activity in Palico’s marketplace, notes that five of the 10 most popular funds in the secondary market over the last six months have Europe as their investment focus. Because GPs tend to carry assets on their books at relatively conservative valuations, the secondary market can offer even better value than primary fundraisings – though usually without the potential out-of-the-ball-park returns that characterize the latter market.
|Palico, the First Place to Go for Primaries, Secondaries, Co-Investments|
In today’s more diverse private equity universe, mainstream or more specialized fundraisings, secondaries and co-investments – anywhere in the world – are easy to find using Palico’s online marketplace. Palico offers LPs and GPs more opportunity to discover, analyze and invest.