PitchBook News - European PE marches onward, upward

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The Research Pitch

April 24, 2021

European private markets march onward, upward

European PE began the year in blistering fashion, setting quarterly records for deal flow and exits.

This is a continuation of momentum seen in the back half of 2020, when we saw pent-up demand (and dry powder) drive especially prolific dealmaking in the face of a global pandemic.

As Dominick Mondesir explains in our latest European PE Breakdown, a surprisingly robust middle market and buoyant leveraged lending environment should continue to propel dealmaking for the rest of the year.

How does Europe's PE market compare to other regions, namely the US?

For the most part, the two have moved in lockstep over the last few years, reflecting the increasingly global nature of PE. But one important area bucks that trend: buyout multiples in Europe are now at seven-year lows, while prices across the Atlantic are exactly the opposite.

We often remark that European private capital markets are about a decade behind the US in their development, trailing in AUM, fundraising, and capital deployment. But the success of many name-brand GPs in Europe, combined with relatively modest prices, should continue attracting capital to the region.

European VC has been at least as impressive in the last year, cresting new highs in terms of deal flow and valuations.

Analyst Nalin Patel will have more on those trends next week, but suffice it to say that many tech-enabled businesses are having no problem raising money in an increasingly digital (and, I would say, frothy) environment.

Founders and VCs have benefited from broader macro trends, taking advantage of toppy valuations in public markets and an influx of cash from SPACs. As we outlined in our European Private Capital Outlooks, this could be just the beginning if regulations make it easier for blank-check companies to list in Europe.

Read our Q1 2021 European PE Breakdown

Feel free to email me or our institutional research team with any feedback or questions.

Best,

Dylan Cox
Lead Analyst, EMEA Private Capital

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Thematic Research

Journey to a More Sustainable Food System

Increasing news and reports of the harmful effects of climate change and environmental pollution have led consumers, governments and entrepreneurs in search of solutions.

Modern industrialized food supply chains are key producers of waste, driving excessive consumption of chemicals and energy, and contributing significant levels of food waste, packaging waste, and greenhouse gases. Throughout the supply chain, stakeholders are disrupting traditional processes and developing innovative sustainable technologies.

Our new foodtech note is the first in a series exploring waste points in the food supply chain and the steps stakeholders are taking to achieve sustainability goals:

read the note

Optimizing Personal Finance via Automation

Autonomous finance represents the next iteration of personal financial management.

Using AI, automated finance has the potential to provide consumers with a digital version of a private banker, financial advisor, and investment manager algorithmically combined into one service—all without their direct input.

Autonomous financing could coordinate all of these aspects

The strongest autonomous finance solutions will allow for consolidation under a single provider with access to consumer financial products like payments, insurance, personal loans and mortgages, savings, and brokerage accounts.

In our most recent fintech note, senior analyst Robert Le provides his outlook on the future of automation in personal finance:

read the note

Crossing Over Into Venture

Crossover investors—typically buy-side public equity asset managers—are increasingly turning to private deals as part of their investment strategy as companies wait longer to go public.

Participation from crossover investors in US VC deals has exploded in the past decade, totaling nearly $60 billion of VC capital in 2020, which accounts for an outsized 36% of total VC deal value. Further, 74% of 2020's IPOs by count and 77% by value included crossover investment in pre-IPO rounds.

In this note, PitchBook's VC analysts explore why companies are increasingly seeking crossover capital and how the trend is likely to affect VC exit strategies:

read the note

Webinars & Events

What's going on in the world of GP stakes?

Our latest podcast episode pulls highlights from a panel discussion we had featuring high-profile investors in the burgeoning investment strategy.

Save the date for these upcoming engagements:

April 28: We're hosting a webinar exploring the opportunities and challenges in the world of autonomous finance. Register here.

April 28: Analysts Hilary Wiek and Dylan Cox will discuss European private capital trends including fundraising, performance and private credit. Learn more.

April 28: Analyst Wylie Fernyhough will comment on what to expect this year in M&A. Learn more.

May 5: Our quarterly Venture Monitor webinar will feature panelists from Silicon Valley Bank, Secfi and NVCA in a discussion around our latest report. Register here.

Deal Commentary

Analyst Brendan Burke weighs in on what's next for robotic process automation specialist UiPath following its $1.3 billion IPO:

"RPA has scaled rapidly due to the demand for automation yet remains a limited solution that may lack durable value.

"Due to its reliance on custom scripts, we view RPA as a bridge technology to cloud-native AI automation that faces competitive risk from AI-native challengers.

"The future of enterprise automation is for front-line users to deploy cloud-native machine learning models that can adapt to dynamic data streams and make accurate decisions.

"UiPath's implementations are not cloud-native and require third-party integrations with around 75 AI model vendors for intelligent decision-making. Additionally, the company lists the ability to recruit AI engineers as a risk factor for the business.

"UiPath's ability to expand across the AI value chain will be critical for its long-term prospects."

Brendan Burke

Senior Emerging Technology Analyst
AI & Machine Learning

In the News

Our insights and data featured in the press:

Eager new investors are "going to go to Robinhood because it's the path of least resistance," says analyst Robert Le in a feature on the startup's popularity. [Bloomberg]

Building out the domestic battery chain is critical for the present and future of the US electric vehicle market, analyst Asad Hussain says in the context of a battery startup's funding round. [Business Insider]

A deep dive into Silicon Valley's booming deal machine leads with—what else?—our venture capital data. [WSJ]

If you're a media member interested in interviewing our analysts, contact our PR team.

ICYMI

Highlights from our research content published over the past few months:

Market updates

Thematic research

Emerging Technology Research deep dives

Coming next week (subject to change)

European Venture Report
SPAC Market Update: Q2
ESG application in the private markets

Thanks for reading! Feel free to email us any time with feedback, questions or tips!

Learn more about the PitchBook Institutional Research Group or access our research libraries for clients and non-clients.

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PitchBook News - European PE marches onward, upward

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