PE and VC deliver record-breaking investments in Europe

  • €138 billion of equity invested in almost 9,000 European companies, up 51% on 2020
  • €118 billion new capital raised, the highest level seen to date

Brussels, Belgium – While the effects of the COVID pandemic continued to be felt across Europe in 2021, with renewed lockdowns and restrictions, private equity and venture capital firms engaged in record-breaking investments and fundraising – guiding entrepreneurs, backing companies and supporting Europeans across the continent.

European private equity firms invested €138 billion in Europe in 2021, registering an astounding 51% increase over 2020 and setting an all-time record in the process, according to today’s newly published report – Investing in Europe: Private Equity Activity 2021 – by Invest Europe, the voice of Europe’s private equity, venture capital and infrastructure sectors, as well as their investors.

The report – which is the most comprehensive source of fundraising and investment data, covering over 1,800 firms – shows strong recovery in activity following the impact of COVID-19, with new investment records for buyouts, growth investments and venture capital, as funds backed more European companies than ever. A total of 8,895 companies received investment, 13% above the average of the past five years, underscoring the industry’s pivotal role in providing support for companies to weather tough conditions.

All private equity segments witnessed strong investment growth and new records in 2021. Investment in buyouts increased by 28% to €79 billion, growth investment soared 124% to €35 billion, while venture capital investment rose sharply by 70% to €20 billion. Information Communications Technology, Consumer Goods and Services, and Biotech and Healthcare ranked as the leading sectors, accounting for two-thirds of investment, as capital flowed into companies that are driving innovation and seeking solutions for a healthier future.

Eric de Montgolfier, CEO of Invest Europe, commented:

  • Private equity is there to help businesses succeed, whatever the conditions. This is an industry whose managers have a broad understanding of markets and deep experience in sectors that are driving European growth and competitiveness, operating on an altogether larger scale than before.
  • Private equity is more than an asset class, it is a complete ecosystem.
  • “Private equity represents a continuous spectrum of backing for businesses, from the earliest stages of seed funding to the latest stage of buyouts.”

Underlining the increasing scale of the European private equity industry, new funds raised reached €118 billion in 2021, the highest level seen to date. Over the past five years, fund managers have raised over €542 billion for investment in start-ups, SMEs, mid-market and large companies across the continent.

Growth funds raised a record €20 billion in 2021, four times the total raised just five years ago. Venture capital achieved its twelfth successive year of fundraising growth with a record €18 billion raised. The records illustrate Europe’s success in creating new tech and biotech champions, as well as investor appreciation of the strong returns available from early-stage and growth investments.

Fund of funds were the largest providers of capital in 2021, accounting for 23% of all funds raised. Pension funds committed 20% of funds raised, followed by family offices and private individuals on 15%.

It was a strong year for exits in 2021, reflecting returning market confidence among buyers and their belief in the businesses built by private equity. Exits at cost (the original equity amount invested) rose by 60% to €41 billion, as firms exited over 3,700 companies, an increase of 13% on 2020 levels. Divestments by growth firms and venture capital both recorded their second highest totals in the 2007-2021 period at €8 billion and €3 billion respectively.

This data, coupled with Invest Europe’s “Private Equity at Work” report, demonstrate European private equity’s growing contribution to the European economy – in terms of investment, financial performance, resilience and job creation.

Download the full report here.

European Data Cooperative to Measure Private Equity

EDC to track European private equity emissions and progress towards net zero. Will also measure women’s role in the board and staff of portfolio companies. EDC to track European private equity emissions and progress towards net zero. Will also measure women’s role in the board and staff of portfolio companies.

European Mid-Market Private Equity supports SMEs and investors

European Mid-Market Private Equity supports SMEs and investors with growth and returns outperformance.

  • European mid-market private equity delivers 17% annualised net return to end-2020
  • €34bn invested into 841 companies in 2020, supporting companies through the pandemic
  • €137bn raised by the mid-market from 2016-2020, up 65% on previous five-year period

Invest Europe, the association representing Europe’s private equity, venture capital and infrastructure sectors, as well as their investors, has today published a new report entitled ‘Europe’s Engine for Growth’, highlighting mid-market private equity’s contribution to mid-sized firms that are the backbone of the European economy, as well as its strong returns for pension funds and long-term investors that support pensions and savings.
The research digs deep into the performance and investment profiles of the European mid-market to give new insights into this critical segment of the private equity industry. It shows that mid-market funds delivered a net IRR of 17% since inception to the end of 2020.
Europe’s Engine for Growth shows the mid-market’s financial commitment to the economy with €34 billion invested across 841 companies in 2020, the seventh consecutive year of investment value growth, as firms continued their strong support of businesses throughout the pandemic. Over the five years from 2016-2020, mid-market private equity raised a total of €137 billion to invest in mid-sized companies, up from €83 billion over the period from 2011-2015, providing significant capital to further aid Europe’s recovery.
Europe’s mid-market plays an essential role in European society through employment across the continent. In 2020, companies backed by mid-market firms employed some 3 million workers – more than the entire population of Lithuania – and created jobs at a rate of 6.4%, outperforming the 0.9% seen in Europe as a whole.
Eric de Montgolfier, CEO of Invest Europe, said:

  • “The European mid-market is where the rubber meets the road in European private equity’s value creation chain: funds take entrepreneurial companies and set them on the path to being European and global success stories.
  • “Across Europe, mid-market private equity funds are creating jobs, driving innovation, and championing sustainability.
  • “Mid-market funds are delivering superior returns that support European pensioners and savers.”

The report draws on real-life case studies to showcase how private equity improves business performance and applies higher ESG standards to deliver social and environmental benefits.
The segment is also an important supporter of innovation and digitalisation trends – creating a more competitive Europe. For instance, investment in ICT (information and communications technology) rose from 18% of all mid-market capital invested in 2016 to 37% in 2020.

PE and VC-backed firms shake off COVID disruption

  • Private equity and venture capital-backed companies add over 103,000 jobs in 2020
  • Businesses with PE/VC investment employ 9.9 million people across Europe, 4.3% of workforce

Invest Europe, the association representing Europe’s private equity, venture capital and infrastructure sectors, as well as their investors, today published its ‘Private Equity at Work’ report. The research illustrates how private equity helped European companies overcome the effects of COVID-19 to add 2% more jobs in 2020, a year when the overall European workforce contracted by 1.6%.

  • Private equity and venture capital-backed businesses created over 103,000 jobs in 2020, supporting SMEs that are the backbone of the economy and giving a boost to innovative and entrepreneurial companies operating in technology, fintech and finance, and biotech and healthcare.
  • The industry demonstrated that it continues to be a cornerstone of European society, securing jobs for almost 10 million workers at 24,663 companies across the continent during an intensely challenging period for business and society alike.

Now in its third year, Invest Europe’s Private Equity at Work tracks the progress in employment and job growth at companies that were backed by private equity and venture capital between 2017 and 2020, providing a cumulative picture of the industry’s contribution to the workplace. Venture capital-backed companies created 50% net new jobs for 86,258 workers over the period, while companies benefitting from buyout investment hired 221,694 more people – an increase of 11%. Generalist private equity firms that invest in businesses across all stages of development added 15% more jobs, or 205,726 additional people.
Eric de Montgolfier, CEO of Invest Europe, commented:

  • “Private equity and venture capital-backed companies throughout Europe employ more people than the entire population of Hungary, and created new jobs in 2020 equalling the entire population of Nancy, France, or Bedford, U.K.”
  • “The pandemic did impact European employment and private equity and venture capital-backed businesses could not entirely escape the effects. However, there can be no doubt that the industry’s long-term investment and hands-on operational approach builds better businesses and creates jobs year in, year out.”

Over 80% of companies in Invest Europe’s research were SMEs employing fewer than 250 staff. This critical segment at the heart of national economies and local communities witnessed job growth of 5.3% and supported 854,459 workers in 2020.
Private Equity at Work highlights private equity’s contribution to sectors that are driving innovation and working for a better future for Europe’s citizens. For example, 7.4% more jobs were created in Biotech & Healthcare, underlining Europe’s leading role in drugs to combat COVID and other life-threatening conditions. Meanwhile, Finance & Insurance – at the centre of the fintech revolution – and Information Communications Technology added 7.7% and 4.9% more jobs respectively.
Private Equity at Work is Invest Europe’s exhaustive study of private equity’s role in employment in Europe. It aims to develop a comprehensive picture of the industry’s contribution to jobs and the economy that those jobs support. To download and read Private Equity at Work in full, please click here.

Invest Europe to Set ESG Reporting Standards

Invest Europe, the association representing Europe’s private equity, venture capital, and infrastructure sectors, as well as their investors, will develop a coherent standard for how private equity and venture capital firms should report on environmental, social and governance (ESG) issues – bringing harmonisation and transparency to essential ESG reporting for investors and regulators.

The new reporting standard will be developed and established by summer 2022, and will enable private equity firms to navigate and comply with the rising demands for action and openness on their ESG activities.

In 2021, a wide range of new ESG-related regulatory reporting requirements were set globally, regionally and nationally, including the EU’s Sustainable Finance Disclosure Regulation. In parallel, a range of privately-led initiatives – both commercially and non-commercially driven – were developed. Some of these respond to regulatory standards, while others are tailored to meet the demands of institutional investors.

Eric de Montgolfier, CEO, Invest Europe, said:

  • The proliferation of ESG reporting requirements places a heavy burden on European private equity managers, many of which are spending too much time on developing templates and reporting, rather than focusing on delivering tangible ESG results across their firms and within portfolio companies.
  • “By creating a standard for ESG reporting, Invest Europe will provide transparency, clarity and harmony to this space – benefiting firms, their investors and stakeholders more broadly.”

The move to develop a reporting standard for the European private equity and venture capital industry reflects Invest Europe’s strategy to position itself as a leader on ESG, and to showcase the benefits that the industry continues to contribute to society and the environment.

In November 2021, Invest Europe published its Climate Ambition, in which it committed to actively support the 2050 goals set out in the Paris Climate Accords. One of the workstreams needed to fulfill that ambition is building and maintaining tools for members and the industry to comply with the rules, and to develop standards that will help the industry move towards net zero.

In parallel, the European Data Cooperative (EDC) will also begin collecting ESG data from the European private equity industry on key performance indicators, including actions related to climate change, female representation in private equity backed companies, and bribery and corruption policies. The EDC is a market-leading database established in partnership with national private equity associations across Europe by Invest Europe. The EDC gathers fundraising, investment, divestment and economic impact data on more than 1,600 European private equity and venture capital firms and their portfolio companies, accounting for 90% of the €754 billion in capital under management in Europe. More information on the ESG data tracking – which will be updated annually – will follow.

Invest Europe’s reporting standard will be developed with the participation of members, representing both LPs and GPs active in Europe, and across the range of private equity segments from local venture capital funds to global buyout groups.

Invest Europe – EU banking framework

Today saw the publication of the European Capital Requirements package review, implementing into EU law the standards set at international level by the Basel Committee.

Over the past 5 years, banks invested €21 billion into private equity, making up around 5% of the overall capital raised by these funds. Through private equity, banks supported indirectly thousands of businesses across the continent, including start-ups and scale-ups which benefitted from such equity to grow. Yet, banks’ commitments to the asset class remain very low and have decreased by more than 100% compared to other fundraising sources in the past decade.

In that context, Invest Europe welcomes that, for the first time, “investments in private equity” are no longer deemed “high-risk exposures” in the new framework. Moreover, the explicit recognition that long-term exposures (such as those to closed-ended funds) shall never be considered speculative is a long-awaited step towards acknowledging the actual risk of long-term, non-redeemable commitments.

These helpful changes do not mask the fact that the EU’s strict implementation of the Basel standards will lead to a significant increase in capital charges for banks’ equity investments and still does not appropriately capture the actual risk of long-term capital. If amendments to reflect the specificities of European markets are not introduced during upcoming negotiations, the review could further limit banks’ contribution to long-term growth and, more broadly, to the Capital Markets Union objectives.

As the representative of the European private equity community, including banks investing into equity funds, Invest Europe is looking forward to working with the co-legislators to determine how credit institutions can commit some of their capital to long-term funds while maintaining the high prudential standards of the framework. As we pointed out in a recent opinion piece, it is only by appropriately balancing audacity and prudence that institutional investors will be able to overcome tomorrow’s challenges.

For more details on Invest Europe’s position on the prudential reviews, please look at our position paper here.

Invest Europe’s 2050 Climate Ambition

  • Invest Europe commits to contribute to the EU becoming climate-neutral by 2050

Invest Europe, the association representing Europe’s private equity, venture capital, and infrastructure sectors, as well as their investors, has decided on its climate ambition. The mission statement will serve as clear guiding principles for its work, both internally and externally, in the years to come.

As the representative organisation for an industry that has an unparalleled skillset in long-term financing of transitions, delivering change management and strategic direction, Invest Europe is uniquely placed to play a meaningful and positive role in achieving the climate neutrality goals set out by the EU and by global partners in the Paris Accord. Hence, Invest Europe commits to actively contribute to the EU becoming climate-neutral by 2050.

Invest Europe, as an association, also pledges to take the necessary steps to become a carbon-neutral organisation by 2030.

In order to achieve the mission statement’s ambitious aspirations, Invest Europe will continue to deploy a comprehensive strategy focused on five key areas:

  1. Participate in the public policy debate on sustainable finance;
  2. Engage constructively with stakeholders on climate neutrality;
  3. Deliver education and training aimed at promoting sustainability in private equity;
  4. Provide a platform for the industry to share insight, best practice, and knowledge;
  5. Remain a thought-leader, guiding the industry and raising the bar with initiatives aimed at meeting climate responsibilities.

This integrated approach represents Invest Europe’s commitment to broaden the scope of its support, resources, and tools provided to its members so that the industry can “walk the talk”.

Eric de Montgolfier, CEO, Invest Europe, commented:

  • “Climate change is one of the greatest threats to the planet and its people and private equity can play a critical role in meeting this challenge.
  • “Not only must our industry help tackle emissions, but it also has an opportunity to support new technologies that can lead to a greener, more sustainable world.”

Invest Europe published its second Climate Change Guide earlier this year, giving members guidance on integrating climate considerations into investment decisions and engaging with portfolio companies on climate change issues. Further guides are planned to give managers and investors more detailed and practical information in playing their part in a sustainable future.

To read our Climate Ambition Statement in full, please click here.

Watch our video

Invest Europe welcomes the new CMU package

The European Commission published today a series of proposals designed to implement the Capital Markets Union (CMU) Action Plan. Among these are the fund management reviews of the Alternative Investment Fund Managers Directive (AIFMD) and the European Long-Term Investment Fund (ELTIF) Regulation, as well as of the European Single Access Point (ESAP) Omnibus.

Today’s CMU proposals demonstrate the crucial role asset managers, such as private equity and venture capital managers, play in the financing of the European economy, by acting as bridge between investors and businesses. While investors committed more than €100 billion of capital in private equity in 2020, private equity backed companies represent more than €10 million employees.

Invest Europe, the association representing the European private equity industry, welcomes the targeted nature of the AIFMD review, which only focuses on areas related to delegation, loan-origination, and some reporting aspects of the Directive.

Martin Bresson, Director of Public Affairs at Invest Europe, commented: “The limited scope of the review is a clear confirmation that the current regulatory structure, which has withstood many crises since its inception, is to a very large extent appropriate. On this backdrop, we appreciate that the European Commission has taken the “if not broken – don’t mend” approach. That being said, there are a few blemishes that we will aim to assist the co-legislators in addressing as negotiations on the file will move forward”.

Next to the AIFMD, the revision of the ELTIF framework has the potential to drive new managers’ interest into this EU voluntary label which allows long-term AIF managers to market to retail clients. Amendments introduced to the proposal will make it easier for managers to set up ELTIF fund-of-funds and to market ELTIFs in a broader range of jurisdictions. Changes to the conflict of interest and diversification rules are also likely to increase the attractiveness of the regime.

“This CMU package of initiatives is by and large a step in the right direction,” says Martin Bresson. “Even on more controversial amendments, the private equity industry’s concerns and specificities have so far been taken into consideration. We can definitely see this as a recognition of the role our industry can – and will – play in the twin transitions Europe needs”.

Explore the world of PE and VC

Launching on 25th November, ‘A Different Angle’ is an online branded film series exploring the role of private equity and venture capital in European society. This series, presented by Invest Europe, the world’s largest association of private capital providers, and produced by BBC StoryWorks Commercial Productions, brings to screen the human stories at the heart of the businesses that are driving change and fuelling growth through private capital.

Most people come into contact with a product or service from a company backed by private equity or venture capital every single day. Many of the brands we love, services we rely upon, and companies we work for benefit from private equity expertise and capital to enable them to flourish and meet our needs. Yet the industry’s contribution to jobs, innovation, funding better retirements, and driving positive societal change can be often overlooked or misunderstood.

A Different Angle aims to improve the understanding of private equity and venture capital, demystifying the virtuous circle of investing that supports our pensions and savings while exploring the true nature of innovation in Europe. It will also raise awareness about the expertise injected into businesses alongside capital, and how profit and purpose, such as high social and environmental goals, can work in harmony to produce better returns for investors and society.

Through powerful human stories, rather than a focus on mere data and figures, A Different Angle shines a light on the private equity industry and the businesses that are making a difference. The films within the series will explore the topics of pensions and savings, Environmental, Social, and Governance (ESG) criteria, employment and job creation, and Europe’s next unicorns. Crossing the continent, the films showcase a range of inspiring stories, from solutions for beekeepers to non-invasive healthcare headsets to combat a range of health issues.

Within the series, leaders like Coller CapitalCinvenEQTEuropean Investment FundIQ Capital, and Mid-Europa Partners have contributed with their commitment and expertise to show how the companies they support innovate, create jobs, and improve our lives.

Simon Shelley, vice president of BBC StoryWorks Programme Partnerships, said: “Private equity and venture capital are ubiquitous but not often understood. This series seeks to demystify private equity and how it can generate positive returns not just for shareholders but for society as a whole. We’re thrilled to be working with Invest Europe to tell important stories from a variety of settings across Europe about job creation, responsible investing, and innovation.

Eric de Montgolfier, CEO of Invest Europe, commented: “Private equity and venture capital are deeply ingrained into the fabric of Europe. Across the continent, this industry is building better businesses that are helping support security in retirement for millions of pensioners, while fuelling innovation, creating jobs, and driving advances in sustainability. We are delighted BBC StoryWorks is producing these films for Invest Europe and bringing these stories to life.

You can explore the full series at www.bbc.com/storyworks/a-different-angle/home and https://www.investeurope.eu/about-private-equity/a-different-angle/ (U.K. viewers can only access the latter) and join the conversation online with #ADifferentAngle.

European private equity registers new first-half investment record as firms plan to increase focus on environmental and social impact

  • Private equity invests €57bn in H1 2021, a new half-year record
  • Over 95% of private equity firms intend to focus more on ESG in the near future

Invest Europe, the association representing Europe’s private equity, venture capital, and infrastructure sectors, as well as their investors, today published two reports underlining the robust recovery in private equity activity in the first half of 2021, as well as the strengthening belief in the industry’s ability to contribute to a stronger economy and better society.

Investing in Europe: Private Equity Activity H1 2021’ provides a detailed snapshot of private equity activity in Europe and reveals that firms invested €57.3 billion in businesses across Europe, the highest ever six-month total. The record was fueled by a strong rise in venture capital investment to €10.2 billion, a 58% increase on the previous six-month record registered in the second half of 2020. Growth investments also hit a new high, more than doubling to €17.5 billion, highlighting the industry’s focus on innovative, fast-growing businesses that are laying the groundwork for a better tomorrow.

The data shows strong first half fundraising of €52.4 billion, as long-term investors, such as insurers and pension funds, continue to target private equity in search of better returns for European savers. A record 365 funds completed fundraising during the first six months of the year, an all-time high for any H1 period. At the same time, divestment increased by 63% over the same period last year as firms successfully exited businesses via public market listings and competitive sales processes.

‘The insight: how Europe’s private equity industry is anchoring long-term investors – Pan-European market sentiment survey’, conducted and published in partnership with consultancy Arthur D. Little, reflects the momentum in private equity activity in the first half of the year and maps the role the industry is poised to play in the near term. Over two-thirds of fund managers see stronger investment opportunities in the coming year compared to the previous 12 months, and almost 60% of investors expect increased allocations to private equity over the coming three years.

As the outlook improves, the industry is concentrating ever more attention on delivering higher sustainability standards and more ethical practices. Some 95% of general partners stated they intend to increase their focus on Environmental, Social, and Governance (ESG) issues in the near future, and 86% are planning to concentrate more on diversity & inclusion. The survey also found that while COVID-19 had a negative impact on the funds of some four in ten managers, 83% of them responded that it also had a positive impact on their portfolio companies.

The theme of greater social and environmental responsibility runs throughout the survey, with 46% of investors expecting to increase allocations to impact funds over the coming 12 months.

Eric de Montgolfier, CEO of Invest Europe, commented: “Record investment levels and increased confidence in the outlook indicate that European private equity has adapted to the challenges of COVID-19 and is moving past the pandemic. At the same time, private equity is evolving as managers and investors focus even more attention on ESG, diversity and inclusion. This is an industry that recognises its role as a cornerstone of the European economy and wants to be at the forefront of the recovery, as well as the trends that matter to society.”

Invest Europe and ADL will be hosting a webinar on the survey from 1700 to 1730 CET on 17 November 2021. To register, please visit this page.

Both Invest Europe’s Private Equity H1 2021 report and Private Equity Sentiment Survey can be accessed here.