Intensifying shareholder pressure, balance sheet constraints and the race to invest in artificial intelligence (AI) mean non-core asset sales are high on the agenda in boardrooms across Europe and North America.

These pressures propelled carve-outs last year across both regions to their highest level since 2007, with a 42% year-over-year increase in transactional volume to just over USD 540bn overall, according to Mergermarket data.

OpenGate Capital, a New York and Paris-based private equity firm that has specialized in corporate carve-outs since its founding more than two decades ago, sees the current market environment as particularly attractive for its control-oriented buyout strategy.

The firm’s playbook is built on executing complex – often cross-border –  separations of divisions that require heavy operational lifting to stand alone.

“We look for where the real alpha is: under-invested, under-resourced businesses that need the right owner and operational transformation plan,” Andrew Nikou, founder and managing partner, told Mergermarket.

Within OpenGate’s sweet spot of lower mid-market to mid-market control buyouts, carve-outs dominate. Since 2005, the firm has made 42 platform acquisitions, including 35 corporate carve-outs, as well as 19 add-ons. The sponsor is currently deploying its third fund, which is targeted to be deployed by around 4Q26. The biggest opportunity currently is in Europe.

“Right now, Europe is where we see the most alpha,” said Nikou. “In terms of geographies, we’ve had the greatest success in France, the Benelux, the DACH region, and select parts of the Nordics.”

The confluence of drivers behind the broader carve-out uptick is pronounced in areas such as aerospace & defense, automotive, transportation, manufacturing, materials, services, and distribution businesses.

Amid the ongoing divestiture wave, the firm is seeing significant activity in heavy industrials. “Shareholder pressure is playing a big role—boards are being pushed to make strategic decisions and focus on core priorities,” said Joshua Adams, a partner, who also cites AI investment strategies as a driver of activity. “Where do those proceeds come from? Do you raise externally? Do a rights issue? Or do you sell something?”

Paris launchpad

OpenGate’s roots can be traced to the years following the dot-com boom and subsequent crash. At the turn of the new millennium, Nikou’s first job was working for a SoftBank-funded start-up that wound down during the ensuing 2001 downturn.

That same year, Nikou joined Tom Gores’ Los Angeles-based Platinum Equity. He soon moved to Paris to establish the firm’s European operations, a role that provided exposure to complex, multi-jurisdictional corporate carve-outs.

Across Europe, corporate divestments were on the rise. By the end of 2004, deal volume had recovered from the 2001 market trough, climbing 70% to USD 123bn during that time frame, according to Mergermarket data. Observing the growing opportunity set, Nikou founded OpenGate in 2005.

“Over the first 10 years, we built a portfolio of approximately 18 investments, including industrial carve-outs, funding purchases through asset-based facilities collateralized by inventory, real estate, equipment, and receivables,” Nikou recalled.

Initially, the firm’s investments were largely funded through capital from Nikou and his partners, as well as re-invested returns. Once it had a growing number of realized investments and an established track record, demand grew for a first institutional fund, which was raised in 2016. Two others have followed, in 2019 and 2023, taking AUM to nearly USD 1.1bn.

The LP base includes pension groups, select sovereign wealth funds, corporations, insurance companies and family offices. Co-investment is also growing. Historically offered only to existing LPs, it opened to non-LPs about two years ago. “Now it’s broader and deeper,” said Nikou.

Like London buses

OpenGate typically acquires corporate divisions with approximately USD 300m to USD 800m in revenue that often span various countries in Europe, and sometimes the US. Nikou believes that having teams across these regions gives the firm a “competitive edge.”

This is valuable in complex situations where it pays to have country-specific regulatory and labor expertise, as well as strong relationships. “Over 20 years, we’ve worked closely with councils and unions,” he said. “We’ve managed complex situations, including plant closures and workforce reductions, with discipline and sensitivity.”

The investment pipeline is building as appetite for corporate divestitures grows. “We’re now seeing more carve-outs than we have in the past 12 to 18 months,” said Adams. “It’s like London buses; you wait and wait, and then they all come at once.”

OpenGate sources the bulk of its deal flow from investment banks, while approximately 20% of opportunities are “proprietary” in nature. Deal sourcing efforts across both channels could be described as corporate-led, since they rely on a deep network of relationships across C-suite executives, M&A heads and strategy leaders, among others.

The firm often knows about processes it participates in before bankers formally launch them. In many cases, it has been discussing non-core assets with corporates a year before an investment bank is hired.

“It’s about speaking their language, understanding their sector priorities, and having meaningful conversations,” Adams said.

Post-deal, the immediate execution challenge for carve-out investors is standing up the business. This includes transition service agreements (TSAs) across functions, separating enterprise resource planning (ERP) and IT systems, while plugging leadership gaps where necessary.

For OpenGate, there is also a focus on profitable growth. “We’re comfortable walking away from contracts that don’t make sense,” said Adams. “Public companies often chase revenue growth, but under private equity, cash flow is king.”

Value creation

OpenGate is currently exiting portfolio companies from its 2019 vintage Fund II, with recent realizations illustrating the value creation levers it pulls.

In June 2024, OpenGate sold silicon carbide (SiC) producer Fiven to Palladium Equity Partners-backed Kymera International. OpenGate had carved the Oslo-based company out of Saint-Gobain in April 2021 at a “favorable” multiple. Under its ownership, key steps that helped drive EBITDA growth included implementing standalone systems, launching a nano-SiC product for semiconductors, optimizing pricing, strengthening management, rationalizing the company’s footprint, and reducing emissions.

More recently, the firm made a partial exit from Belgium-based ScioTeq, selling a majority stake in the maker of rugged visual displays for the A&D industry to French private equity firm Tikehau Capital. OpenGate had acquired ScioTeq in 2021 from TransDigm for USD 200m, as the Cleveland-based aircraft components manufacturer made divestitures following its 2019 acquisition of Esterline. OpenGate’s value creation strategy focused on building a US presence, ramping up R&D and innovation, and driving margin expansion.

Generally, the firm prioritizes exits to strategics, although it includes other sponsors in all of its exit processes.

“With over a trillion dollars of private equity capital sitting on the sidelines and low deployment levels in recent years, financial sponsors have become very competitive on pricing,” said Nikou.

Abu Dhabi presence 

Looking ahead to the rest of 2026, Nikou cites a range of priorities for the now over 20-year-old firm: more platform acquisitions and add‑ons; deeper LP relationships and partnerships and co-investment opportunities; doubling down on European industrial carve‑outs; selective geographic expansion in Europe and, opportunistically, in North America; and talent acquisition and development.

Regional expansion in the Middle East could also be on the horizon. OpenGate is considering the possibility of setting up shop in Abu Dhabi to establish a greater presence in the emirate.

“The Middle East has become a focal point; we’re looking to establish offices in Abu Dhabi in the near future,” Nikou said. “We see significant capital development opportunities in the region, particularly in the UAE and Saudi Arabia.”