European Private Equity Market Update

Introduction: Overview of European Private Equity Activity

From 2015 through 2019, the market displayed a steady upward trajectory, both in deal count and aggregate transaction value, underpinned by historically low interest rates, robust credit markets, and abundant dry powder. This period culminated in 2019 with total deal value reaching approximately €412.7 billion across more than 5,400 transactions, setting a strong pre-pandemic benchmark for the industry.

The onset of 2020 disrupted this momentum, with deal value dipping to €341.3 billion amid uncertainty driven by COVID-19. However, as monetary stimulus flooded the European economy and capital markets recovered, the PE sector entered an unprecedented expansion phase. By 2021, total deal value surged to €593.8 billion, marking a peak in both value and transaction volume. This acceleration reflected investors’ eagerness to deploy accumulated capital into resilient, tech-enabled, and cash-flow-generative assets. The following year, 2022, saw a marginal increase in total value to €603.2 billion, yet this masked early signs of tightening financial conditions as inflation pressures began reshaping valuation paradigms and debt structures.

As of 2024 and into 2025 year-to-date, European deal activity has notably decelerated. The combined effects of elevated borrowing costs, geopolitical uncertainty, and declining exit opportunities have constrained both buyout appetite and pricing flexibility. Year-to-date 2025 figures show deal value at €222.1 billion with 3,182 deals, nearly half of 2021’s volume, emphasizing a structural normalization of the market. While overall dealmaking has slowed, the decline underscores a pivot toward quality over quantity—where sponsors are prioritizing strategic assets, operational value creation, and flexible financing structures over pure scale.

This contraction in activity is mirrored by volatility in fund asset flows across the euro area. According to European Central Bank data, quarterly transaction flows in PE fund assets have fluctuated sharply since 2022, reaching highs of €23.7 billion before contracting to negative levels, reflecting both valuation adjustments and investor caution. The resurgence to €7.6 billion in early 2025 suggests that, while sentiment remains restrained, allocators are selectively re-engaging in anticipation of lower rate environments and stabilizing macro conditions.

Overall, the European PE market has transitioned from a phase of exuberant growth to one of strategic recalibration. The coming quarters will test fund managers’ ability to adapt to higher financing costs, prolonged holding periods, and a renewed emphasis on operational excellence as the key driver of returns.

Sectoral Dynamics in European Private Equity

The composition of European private equity dealmaking has evolved markedly over the past decade, reflecting both cyclical market conditions and structural shifts in the region’s industrial landscape. From 2015 through 2019, the sector mix remained relatively balanced, with B2B and B2C transactions together representing nearly 70% of all deals. However, as the market expanded into the post-pandemic years, activity became increasingly concentrated in B2B and technology-driven verticals, underpinned by digitization trends and supply chain resilience strategies. By 2024, B2B accounted for over 40% of all transactions, while IT and Healthcare—historically mid-tier segments—emerged as the most dynamic growth areas in both deal volume and value.

The Healthcare and IT sectors demonstrated sustained resilience, driven by secular demand for data infrastructure, software scalability, and medical innovation. Healthcare deals nearly doubled from 379 in 2015 to 724 in 2022, while IT transactions surged from 644 to 1,849 in the same period. These segments benefited from their defensive qualities, scalability, and the ongoing integration of digital health and automation technologies into traditional industries. Meanwhile, Energy and Materials & Resources remained relatively subdued, reflecting both regulatory pressures on carbon-intensive sectors and limited private equity appetite for cyclical or commodity-exposed businesses.

While IT and Healthcare led in volume, the Energy sector consistently commanded the highest average deal sizes, averaging €170 million in 2022 and €132 million year-to-date in 2025. These large-ticket transactions were primarily infrastructure-related—renewable generation, storage, and grid modernization—where the capital intensity elevated the mean deal value despite lower deal counts. By contrast, B2C and B2B deals, while numerous, trended smaller, typically between €50–70 million, reflecting fragmented target universes and more cautious valuations amid tighter debt markets.

Financial services also witnessed a notable upturn in both value and frequency, reaching a record €53 billion in 2022, supported by consolidation among asset managers, fintech scale-ups, and specialty lenders. However, as rising rates compressed margins and dampened consumer credit appetite, the pace slowed in 2024–2025, with deal values falling to roughly €26 billion.

Relative performance indices highlight IT’s outsized expansion—deal counts more than tripled from 2015 levels by 2021, outpacing all other industries. Healthcare and Financial services followed closely, signaling investors’ shift toward sectors with recurring revenue models and technological adaptability.

Even amid 2023–2025 headwinds, these segments retained elevated deal activity compared to pre-pandemic baselines, confirming their strategic priority for sponsors. Conversely, B2C transactions lagged, reflecting weakening consumer sentiment and reduced discretionary spending under inflationary conditions.

When normalized by value, IT and B2B stand out as the principal engines of private equity deployment in Europe. IT deal value reached more than 300% of 2015 levels by 2024, driven by high-multiple acquisitions of cloud software, cybersecurity, and digital infrastructure assets. B2B’s steady climb reflects private equity’s long-term preference for scalable, non-cyclical industrial platforms capable of margin enhancement through operational transformation.

Meanwhile, energy’s trajectory underscores the growing intersection of private capital with Europe’s decarbonization agenda, positioning the sector as an emerging pillar of strategic investment rather than a purely cyclical play.

In sum, European private equity’s sectoral evolution underscores a decisive reallocation of capital toward technology, healthcare, and infrastructure-linked assets. As 2025 unfolds, fund managers are refining portfolio strategies to balance defensiveness with innovation—favoring sectors that offer structural growth, pricing power, and resilience in a high-rate environment.

Regional Overview of European Private Equity Activity

The geographical composition of European private equity (PE) deal activity reveals a highly diversified yet cyclical market, shaped by national economic structures, capital market maturity, and cross-border investment flows. Between 2015 and 2021, all major regions—UK & Ireland, France & Benelux, and DACH (Germany, Austria, Switzerland)—experienced strong expansion, with deal counts doubling across most jurisdictions. The UK & Ireland consistently dominated in absolute volume, accounting for over 25% of all European transactions during peak years. Despite Brexit-related uncertainty, London’s role as a financial and professional services hub, alongside deep debt markets and sophisticated exit avenues, has maintained the UK’s leadership in private equity deployment.

The France & Benelux region followed closely, reflecting robust mid-market buyout activity, particularly in business services, consumer goods, and healthcare. By 2021, this bloc reached 2,212 transactions, surpassing all other continental regions. Meanwhile, the DACH markets—long characterized by industrial specialization and family-owned enterprises—saw rising sponsor activity, with deals expanding from 503 in 2015 to over 1,000 in 2024, as funds targeted automation, energy transition, and manufacturing efficiency plays.

In terms of transaction size, regional dispersion is less pronounced than volume metrics might suggest. The UK & Ireland and France & Benelux exhibit comparable average deal values, hovering around €70–75 million in 2025 year-to-date, reflecting their concentration of mid-market and upper mid-market deals.

The DACH region remains a high-value territory, with an average deal size of €76 million, driven by its prevalence of strategic carve-outs and industrial consolidation plays. Interestingly, Southern Europe, historically a lower-value segment, has closed the gap—reporting an average of €65 million—as international funds increasingly participate in Spanish and Italian infrastructure, healthcare, and consumer transactions.

Relative to 2015 baselines, the fastest growth in deal counts occurred in Nordic and Southern European markets, where activity more than doubled by 2021. The Nordics’ rise stems from their advanced technology ecosystem, energy innovation, and sustainable finance leadership, making the region a magnet for thematic capital.

Similarly, Southern Europe benefited from improving macro stability and EU-backed recovery initiatives post-2020, which spurred interest in infrastructure and real assets. In contrast, Central & Eastern Europe and Israel remained smaller contributors to overall European deal flow, constrained by market size and regulatory complexity, though both regions continue to present niche opportunities in tech and energy transition assets.

When adjusted for deal value, the UK & Ireland retains a commanding position, with total transaction value surpassing €150 billion in 2024, roughly 250% of 2015 levels. France & Benelux follows, underpinned by strong exits and sponsor-to-sponsor transactions. The Nordic region, while smaller in volume, demonstrates outsized growth in aggregate value—peaking above 300% of 2015 levels—as investors increasingly target scalable technology assets and renewable platforms. Meanwhile, the DACH region illustrates steady and disciplined growth, reflecting its position as a core PE stronghold rather than a speculative frontier.

In summary, the regional segmentation of European private equity underscores a multi-core ecosystem: the UK remains the center of liquidity and deal flow; France & Benelux and DACH serve as stable continental anchors; and the Nordics and Southern Europe have emerged as vibrant growth frontiers driven by innovation and sustainability themes. As 2025 unfolds, the relative resilience of these markets will hinge on their adaptability to financing constraints and their capacity to attract global LP commitments amid shifting interest rate regimes.

Entry Dynamics in European Private Equity

The entry landscape in European private equity has undergone a notable structural rebalancing in recent years, shaped by liquidity cycles, corporate restructuring, and investors’ evolving risk preferences. As of 2024, family-to-sponsor transactions remained the dominant source of new investments, representing 53% of all PE-backed entries, though this share has moderated from a steady 56–59% range over 2018–2023. This moderation reflects a maturing market where a growing proportion of European mid-market companies have already undergone one or more rounds of institutional ownership.

At the same time, sponsor-to-sponsor deals—often referred to as secondary buyouts—have made a pronounced comeback, increasing from 26% in 2023 to 31% in 2024. This resurgence is driven by both a slowdown in IPO markets and the difficulty of executing trade sales under higher financing costs, which make existing PE sponsors the most active buyers of proven, cash-generative assets. Carve-outs from corporates accounted for 14% of entries, remaining a steady feature of the European landscape as conglomerates continue to divest non-core divisions to streamline balance sheets. Public-to-private transactions, though only 3% of entries, have shown resilience in 2024 amid depressed public valuations and strategic sponsor interest in undervalued listed assets, particularly in the UK and Nordics.

Deal type composition also varies meaningfully by target size. Family-to-sponsor transactions dominate the sub-€50 million and sub-€10 million EBITDA ranges, where private ownership remains fragmented and founder succession challenges persist. As target scale increases, carve-outs and take-privates gain prominence, particularly among companies with EBITDA exceeding €200 million, where carve-outs represent 32% of entries and public-to-private transactions account for 10%.

Larger deals often require institutional processes, complex financing, and strategic repositioning—factors that align naturally with sponsor-to-sponsor or carve-out structures. This pattern underscores how deal complexity, governance maturity, and capital intensity increase with company size, shifting entry routes away from family ownership toward corporate divestments and inter-sponsor transfers.

The evolution of sector exposure across new entries since 2010 highlights a decisive pivot toward asset-light, innovation-driven business models. The share of TMT (Technology, Media, and Telecommunications) deals has expanded by roughly +9 percentage points, while Services grew by +4 percentage points, reflecting investors’ growing appetite for scalable, technology-enabled platforms. Conversely, Consumer-oriented sectors saw their share decline by –11 percentage points, mirroring subdued demand dynamics, margin compression, and a challenging exit environment in retail and discretionary categories.

Overall, the European entry market is becoming increasingly institutionalized and sophisticated, characterized by higher secondary activity, sectoral specialization, and a stronger bias toward scalable digital and service models. The post-2020 environment has reinforced the preference for resilient, capital-efficient businesses capable of compounding returns amid constrained leverage and longer holding periods. As macro volatility persists into 2025, entry strategies will likely continue emphasizing operational excellence and value creation over financial engineering—a hallmark of a maturing private equity ecosystem.

Exit Environment in European Private Equity

After a decade of expansion, European private equity exits have entered a pronounced slowdown phase. From the 2015–2019 period of steady activity—when annual exit values hovered around €230–€260 billion—the market peaked dramatically in 2021, reaching €408 billion across nearly 1,700 transactions, fueled by buoyant valuations, abundant liquidity, and strong public equity markets. However, the combination of inflationary pressures, tightening credit conditions, and reduced buyer confidence has since reshaped the exit landscape.

By 2024, total exit value had declined to €272 billion, while 2025 year-to-date data show only €112 billion across 771 deals, marking one of the weakest years in recent history. The fall in both value and volume highlights a constrained exit pipeline, where sponsors have delayed realizations in anticipation of better pricing conditions and more favorable financing markets. Secondary sales remain feasible, but strategic and IPO-driven routes have been materially curtailed by valuation mismatches and public market volatility.

In terms of exit routes, corporate acquisitions continue to dominate, accounting for 46% of total exits in 2025 (YTD), though this share has steadily declined from nearly 60% in earlier years. The retreat in corporate buyers reflects both macroeconomic caution and reduced balance-sheet capacity among strategic acquirers. Conversely, sponsor-to-sponsor transactions have grown as an alternative liquidity mechanism, increasing their share to 52%, the highest level in over a decade. This shift underscores the growing institutionalization of the European private equity ecosystem, where funds recycle assets across different ownership stages to meet return and liquidity needs.

Public listings, once a vital channel during the 2021 exit boom, have nearly vanished from the market. After accounting for 9% of exit counts in 2021, IPOs now represent just 2% of total exits, constrained by weak aftermarket performance and valuation compression in equity markets. This collapse in IPO activity reinforces the reliance on private secondary and trade sale routes as the primary exit mechanisms.

When measured by value rather than count, sponsor acquisitions represent an even larger share of realized capital—55% of exit value in 2025, compared to 36% in 2023. Corporate acquirers remain significant but secondary to sponsor-driven liquidity, accounting for 39% of total exit value. Public listings, once a source of blockbuster exits, have fallen to 7%, their lowest share in a decade. This concentration reflects the dominance of large secondary buyouts among mature funds seeking liquidity amid a stalled exit window.

The current exit landscape is characterized by extended holding periods, muted pricing multiples, and selective buyer engagement. While sponsor-to-sponsor transactions have temporarily filled the gap, the sustainability of this pattern depends on a broader market recovery—particularly in financing costs and public equity valuations. Looking ahead, the reopening of IPO markets and the return of corporate balance-sheet activity will be essential to restoring a healthy exit cycle and rebalancing capital flows across Europe’s private equity ecosystem.

Valuation Multiples in European Private Equity

Valuations across the European private equity market have experienced a sustained correction over the past three years. Median EV/EBITDA multiples fell from 14.3x in 2021 to 10.0x in 2024, a decline of roughly 30%, marking the longest downward streak since the post-GFC period. The contraction has been driven by tighter financing conditions, reduced leverage availability, and lower sponsor competition for deals amid a cautious macro environment. The top quartile of transactions—representing premium assets in defensible growth sectors—also saw meaningful compression, from 20.1x at the 2021 peak to 14.3x in 2024. This normalization reflects a recalibration of risk pricing as capital costs reset and investors reassess forward earnings potential.

Looking ahead, multiples are expected to stabilize rather than continue their decline. With central banks signaling a pause in rate hikes and dry powder levels remaining historically elevated, renewed deal momentum could set a floor under valuations. The re-emergence of competitive auction dynamics, particularly for high-quality assets, is likely to prevent further widespread multiple erosion.

Entry type remains a key determinant of valuation dispersion. Carve-outs typically transact at lower multiples—median of 10.5x versus 12.8x for sponsor-to-sponsor deals—reflecting their transitional nature and the heavy reinvestment required to establish standalone operations post-acquisition.

In contrast, sponsor-to-sponsor transactions command the highest valuations, supported by de-risked financials, institutional governance, and proven growth models. Family-to-sponsor and public-to-private transactions fall in between, with medians of 11.1x and 11.3x, respectively, capturing a mix of legacy owner transitions and strategic take-privates of listed companies.

This hierarchy underscores how deal type mirrors risk-adjusted maturity: the more operationally complete and performance-tested the target, the higher the multiple investors are willing to pay.

Growth remains the primary driver of valuation premiums. Companies achieving >25% revenue CAGR over six years have sold at a ~50% multiple premium compared to those growing below 5%. Median multiples rise from 9.8x for sub-5% growth companies to 14.8x for high-growth assets, while top-quartile deals can exceed 24x EV/EBITDA.

This clear gradient highlights the structural market bias toward scalability and recurring revenue—traits that remain attractive even under higher interest rate regimes.

Investors continue to reward revenue durability and margin expansion, suggesting that valuation resilience is concentrated among companies combining top-line growth with predictable cash flows, particularly in tech-enabled and service-oriented verticals.

Sector analysis reinforces the valuation stratification across Europe’s private equity universe. TMT (Technology, Media & Telecommunications) and Science & Health stand out with median multiples of 15.5x, well above the European average. Their premium reflects robust fundamentals: high growth visibility, asset-light models, and secular tailwinds from digitalization, AI adoption, and healthcare innovation.

In contrast, Industrials and Consumer sectors command significantly lower valuations, with medians of 9.5x and 10.9x, respectively. These industries face structural challenges—ranging from input cost volatility to cyclical demand and margin pressure—which limit investor willingness to underwrite high multiples. Energy & Materials, at 10.0x, occupies a middle ground, buoyed by energy transition investments yet constrained by commodity-linked volatility.

Overall, the European PE market is undergoing a valuation normalization phase, shifting from liquidity-driven exuberance toward fundamentals-driven pricing. Growth, sector positioning, and operational quality—not leverage—are once again the decisive factors shaping valuation outcomes as the cycle matures.

European Macroeconomic Landscape: Conditioning the Business Environment

Monetary Dynamics and Interest Rates

The European monetary landscape over the past four decades reveals a long-term structural expansion in liquidity, as reflected by the continuous growth of M2, which now exceeds €15 trillion. This sustained monetary growth mirrors both the deepening of the European financial system and the ECB’s commitment to maintaining accommodative liquidity conditions.

However, recent years have marked a departure from the long-term trend.

Periods of monetary expansion—most notably following the 2008 Global Financial Crisis (GFC) and the COVID-19 pandemic—produced sharp deviations above trend, as central banks injected liquidity to stabilize credit markets and fiscal authorities implemented massive support measures. These stimulus cycles were followed by pronounced contractions and monetary sterilizations, as it can be observed in our detrended monetary analysis (chart above), reflecting the tightening phase now underway.

Historically, monetary cycles have been tightly correlated with shifts in long-term interest rates. During the 2010s, subdued inflation and quantitative easing compressed yields to near-zero levels, supporting asset valuations and deal activity across private markets. The post-2021 reversal, however, has been equally forceful: as excess liquidity was withdrawn and inflation surged, the European yield curve repriced sharply upward.

The 10-year European sovereign yield has risen from negative territory in 2021 to around 3.0% in 2025, marking a structural regime shift. Real rates have normalized, effectively raising the cost of capital across corporate and private equity transactions.

This tightening has slowed deal flow, reduced leverage availability, and forced valuation adjustments.

Yet, the stabilization of policy rates near current levels suggests the eurozone is transitioning from restrictive to neutral conditions. The expected moderation in yields through late 2025 could restore financing confidence, supporting a cyclical rebound in investment and M&A activity.

Trade Flows, Tariffs, and Transatlantic Exposure

Trade relations remain a pivotal determinant of Europe’s industrial performance. The United States accounts for roughly 21% of extra-EU exports, equivalent to 4% of the EU’s total GDP. Among major economies, Germany (22.7%) and Italy (21.2%) are the most exposed, while Spain (12.4%) has a relatively lower share.

This deep interdependence highlights Europe’s sensitivity to transatlantic trade dynamics, particularly in sectors such as autos, pharmaceuticals, and advanced manufacturing.

In 2024, the export mix underscores Europe’s dual industrial and scientific strengths:

• Immunological products (€61B) and medical goods (€41B) remain the largest categories, reflecting Europe’s global leadership in life sciences.

• Automobiles (€40B) and auto parts (€9B) continue to anchor Germany’s and Italy’s manufacturing exports.

• High-tech goods—such as turbines (€14B) and aircraft (€10B)—illustrate Europe’s capital goods and aerospace capabilities.

However, renewed tariff discussions between the EU and the US—particularly regarding electric vehicles and clean tech subsidies—introduce potential headwinds. These frictions, coupled with evolving US industrial policy and protectionist incentives under the Inflation Reduction Act (IRA), could redirect investment decisions and reshape cross-border supply chains.

Europe’s policy response is increasingly coordinated through industrial competitiveness frameworks and strategic autonomy measures—aimed at bolstering domestic capacity in critical technologies while maintaining open access to transatlantic markets. Over the medium term, this environment favors capital reallocation into advanced manufacturing, energy transition, and digital infrastructure, supported by a gradual easing of monetary conditions.

Interest Rate Dynamics and Their Impact on Private Equity Deal Types

The relationship between interest rates and private equity activity in Europe has proven deeply cyclical, reflecting the sector’s dependence on credit availability, leverage dynamics, and relative return expectations. From 2015 through 2021, when the 10-year European sovereign yield hovered near zero or even dipped into negative territory, deal activity surged across all categories, led by leveraged buyouts (LBOs). Ultra-loose monetary policy and cheap financing reduced the cost of debt and inflated enterprise valuations through lower discount rates in DCF models.

At its peak in 2021, aggregate buyout volumes exceeded €140 billion, coinciding with historically low yields and the post-COVID liquidity surge. Add-ons also reached record highs, benefiting from sponsors’ ability to bolt on smaller assets at favorable financing terms, while growth equity activity expanded moderately in response to abundant risk capital seeking higher-yield opportunities.

However, this dynamic reversed sharply as rates began to rise in late 2022. The 10-year yield increased from below 0% to above 3%, pushing the weighted average cost of capital (WACC) higher and compressing valuations across both entry and exit markets. As the opportunity cost of capital shifted—making risk-free assets more attractive relative to leveraged returns—deal volumes contracted across the board. The LBO segment, most exposed to leverage and refinancing costs, experienced the sharpest correction.

The statistical analysis of 42 quarterly observations highlights the asymmetric sensitivity of deal types to rate movements. The standard deviation of interest rates (1.1%) translates into markedly higher volatility for buyout activity, with a relative volatility multiple of 17.5x—the highest among PE deal categories. Add-ons exhibit a more moderate but still meaningful multiple of 10.4x, while growth equity deals, typically less debt-dependent and more equity-financed, demonstrate the lowest sensitivity at 5.9x.

This dispersion underscores the structural mechanics of how rising rates alter private market behavior:

• Buyouts, reliant on leveraged capital structures, face dual compression—both from reduced debt capacity and declining valuation multiples.

• Add-ons, while smaller and often synergistic, are constrained by the parent fund’s leverage headroom and refinancing risk.

• Growth equity, with limited or no leverage, is relatively insulated but still affected by capital reallocation away from higher-risk illiquid assets toward fixed-income instruments.

The volatility transmission from monetary policy into PE flows therefore operates through both valuation mathematics and behavioral finance. When yields rise, discounted cash flow (DCF) valuations fall, liquidity tightens, and investors reprice future growth. Conversely, in zero-rate environments, capital abundance inflates deal activity beyond fundamentals—a pattern evident during 2020–2021.

As Europe moves through 2025, stabilization of rates near the 3% mark suggests that the most severe compression phase is over. With financing conditions gradually normalizing and dry powder levels still high, private equity managers are adapting by focusing on smaller, operationally resilient transactions and sector-specific growth platforms less reliant on aggressive leverage. The next phase of the cycle will likely reward disciplined capital structuring and differentiated sourcing, rather than financial engineering driven by cheap debt.

Conclusion

The European private equity landscape has undergone a profound recalibration over the past three years, shaped by a shifting macroeconomic regime and evolving market dynamics. After a decade defined by abundant liquidity and record-high valuations, the environment is now characterized by tighter monetary conditions, disciplined capital deployment, and a renewed emphasis on operational value creation.

Deal activity data illustrate a clear cyclical adjustment. PE-backed entries remain anchored by family-to-sponsor transactions, which continue to dominate the market but have gradually declined in share as sponsor-to-sponsor deals rebound amid renewed portfolio rotation. Carve-outs and public-to-private transactions are gaining traction, particularly in higher-value segments, as corporates restructure and public market valuations remain subdued. Sector-wise, investors have shifted toward asset-light, resilient industries such as Technology, Media & Telecommunications (TMT) and Health & Science, which now command the highest valuation multiples, reflecting their growth, scalability, and defensive qualities.

On the exit side, activity has normalized after the post-pandemic surge. Exit volumes and values have fallen back to pre-2021 levels as higher interest rates and weaker public markets constrain realizations. Nevertheless, sponsor acquisitions and corporate trade sales continue to dominate exit routes, while IPO windows remain limited. This moderation signals a maturing phase in the cycle rather than structural decline—one where disciplined timing and creative liquidity solutions will determine returns.

Valuation trends reinforce this structural reset. EV/EBITDA multiples have declined for a third consecutive year, compressing across the distribution but stabilizing at healthier, more sustainable levels. Growth remains the central driver of valuation dispersion, with companies delivering over 25% annual revenue growth trading at roughly 50% premiums to low-growth peers. Similarly, multiples vary sharply by sector and entry type, with carve-outs typically priced lower due to their transitional complexity.

Macro conditions continue to set the tone for the market. The sharp monetary contraction following years of stimulus has raised the cost of capital, reduced leverage availability, and recalibrated investor expectations. Yet, as interest rates plateau around 3%, stability is gradually returning to financing markets. Meanwhile, Europe’s trade resilience—particularly its deep links with the US in pharmaceuticals, autos, and aerospace—anchors its industrial base even amid tariff uncertainty.

Ultimately, European private equity is entering a new equilibrium: one driven less by financial engineering and more by operational excellence, technological transformation, and selective deployment of capital. As liquidity stabilizes and confidence rebuilds, the next growth cycle will favor managers who combine strategic patience with sectoral insight—positioning themselves not just to recover, but to lead in a higher-cost, fundamentals-driven era of private investing.

Sources & References

European Central Bank. (2025). Long-term interest rate for convergence purposes - 10 years maturity, denominated in Euro - Euro area 20 (fixed composition) as of 1 January 2023, Euro area 20 (fixed composition), Monthly. https://data.ecb.europa.eu/data/datasets/IRS/IRS.M.I9.L.L40.CI.0000.EUR.N.Z 

European Central Bank. (2025). Monetary aggregate M2 reported by MFIs, central gov. and post office giro institutions, Stocks, Euro area (changing composition), Monthly. https://data.ecb.europa.eu/data/datasets/BSI/BSI.M.U2.Y.V.M20.X.1.U2.2300.Z01.E 

European Central Bank. (2025). Total assets held by Private equity funds in the euro area (transaction), Euro area (changing composition), Quarterly. https://data.ecb.europa.eu/data/datasets/IVF/IVF.Q.U2.N.TP.T00.A.4.Z5.0000.Z01.E 

Gainpro. (2025). The State of European Private Equity. https://www.gain.pro/investor-reports/the-state-of-european-private-equity-report-h1-2025 

HSBC. (2025). Europe macro tracker. Budget and Tariffs. Fabio Balboni, Senior Economist, Eurozone.

Pitchbook. (2025). Q2 2025 European PE Breakdown. https://pitchbook.com/news/reports/q2-2025-european-pe-breakdown