This report features an overview of the European private equity (PE) market, along with insights from 250 PE principals based in the region.

Highlights include:

• A brighter outlook for 2024. Despite continued geopolitical concerns, inflationary pressures and high interest rates, 51% of respondents expect their firms to increase the number of new investments they make. Moreover, only 10% expecting to decrease activity slightly. GPs are sitting on a wealth of dry powder and are ready to put it to good use.
• Competition intensifies. 71% of respondents agree that competition for investments among PE firms increased in 2023 compared to 2022, with one-fifth saying it significantly increased. Dealmaking may have slowed, but fund managers are vying for the most sought-after companies, which are showing growth regardless of sluggish GDP forecasts.
• Buy-and-build in vogue. In the face of elevated financing costs for large platform deals, PE firms are looking to buy-and-build strategies to drive synergies, cross-selling opportunities and scale. Indeed, 77% say buy-and-builds will be an influential factor in their equity stories this year.
• Moving in on manufacturing. 36% of respondents expect to allocate more capital to the industrial production/manufacturing sector over the next few years.
• ESG demands rise. Environmental, social and governance (ESG) factors are taking on greater importance. As a result, 43% cite increased ESG expectations as the number one changing demand among their investors, and 34% point to improved disclosure in ESG reporting. LPs are clearly an important driver of change in this area.
• Data analytics infiltrates due diligence. Data analytics and artificial intelligence (AI) are transforming how PE firms evaluate investments, with 87% already using data analytics for due diligence and target identification. Furthermore, 33% of respondents identify data analytics as the single most crucial area for their digital investment.
• Germany shines. GPs are inherently long-term investors and are looking beyond Germany’s current economic difficulties. The country is the most attractive PE investment destination over the next five years, according to 65% of respondents. This is ahead of the UK, Middle East and Netherlands.

The report is also available at pwc.de