Private equity dealmaking activity remained resilient in Europe through the first half of 2022, as record amounts of dry powder and increased financing from private credit funds kept deals moving.

Here's a look at six key trends from our Q2 2022 European PE Breakdown that illustrate how the ecosystem has fared amid a challenging macroeconomic environment.
   
European PE deal value well surpassed 2021's H1 figure, with an estimated €463.5 billion transacted across 4,053 deals, representing year-over-year increases of 35% and 16%, respectively. Transactions continue to grow in size, particularly at the top of the range, pushing total deal value upward.

As the year continues, dealmaking is expected to come under more pressure as rising inflation and discount rates—the cost of investing relative to expected cash flows—increase costs at the portfolio company level, squeeze valuations and expand the cost of leverage for new PE deals.
   

The business products and services sector received the largest share of European PE capital in the first half of the year, with €124.2 billion invested—its highest ever H1 figure. Companies in the sector are likely maintain or even grow their revenues as the market becomes more distressed, while its consumer counterpart is expected to continue to struggle.
   
Even as deal activity cools, take-privates are expected to continue to be an important theme in 2022 as turmoil in the public markets causes assets to drop in price. In H1, €17.5 billion was dedicated to these deals—a 22% increase from the first half of 2021.
   
Carveout activity got off to a slow start in H1 2022, with 181 deals worth €36.2 billion. However, with a potential recession on the horizon, companies will likely seek to shore up their balance sheets and exit non-core assets, thereby increasing the opportunity for PE buyers.
   
PE exit activity in Europe fell sharply in the first six months of the year from 2021's highs with some 739 deals totaling and estimated €157.8 billion.

Public listings were hit the hardest due to increased volatility and significant valuation adjustments in the public markets. Sponsor-to-sponsor exits were the most robust due to high levels of dry powder. If they maintain their pace, this will be the first year on record that sponsor-to-sponsor exits surpass corporate acquisitions.
   
Fundraising activity is on track toward its lowest total fund count ever with just 40 vehicles closing in H1. LPs are struggling to keep up with re-up demand from existing GPs, and the fall in distributions due to the current exit environment has reduced fundraising.

PitchBook analysts predict that GPs focusing on areas including distressed strategies and private credit may see more interest due to their downside protection and floating rate structures.