Private Equity Funds in Europe Are Focusing on Exit Strategies

Bankers and investors say that, despite private equity funds in Europe facing cash shortages, they are rethinking purchasing potentially hard-to-sell businesses and are carefully working on exit plans before making any further acquisitions. A source knowledgeable about the strategy indicated that Brookfield withdrew from making a binding offer for Spanish waste disposal company Urbaser due to concerns about exit options. This individual also noted that one reason could be that Urbaser might eventually become too large to sell.

Nestor Paz-Galindo, UBS's global head of banking for EMEA and co-head of global mergers and acquisitions, stated, "In the last cycle, funds did very well on the entry side and performed very well in execution, but exits have been tougher." Paz-Galindo mentioned that while large deals will continue to occur in Europe, it is likely that fewer funds will remain involved.

Bankers expect that by 2025, private equity funds will face pressure not only to distribute record levels of unspent capital but also to sell assets that they have held for longer than usual. They noted that reselling companies from one financial investor to another has proven difficult in Europe, with private equity-backed companies witnessing fewer bidders in auctions and sales processes taking longer.

Stephen Pick, head of M&A for Barclays in EMEA, commented on how some firms are attempting to exit, stating, "There are concerns that some assets are too large, and we see sponsors considering selling divisions or stakes to reduce size."