How Low Can Europe Go? PE Wants to Know & is Willing to Wait

The EU limbo is on. Half of the continent has slipped into a recession, and despite European Central Bank Chief Mario Draghi’s pledge to buy unlimited bond purchases to stave off economic disaster, the markets seem to indicate investors aren’t buying it, literally.

The endgame here—well at least, the current endgame, until the really messy one plays out—has been a 2012 fraught with little European M&A—and that includes private equity. In fact, the anemic results posted so far this quarter are the lowest third quarter results for M&A in a decade: Thomson Reuters data show that announced deals during the quarter about to conclude have only reached $455 billion as of mid-September, compared to second quarter figures of $620 billion.

One source suggested to peHUB that a growing number of large-cap LBO shops are seeking out capital for European funds, but have held off on fundraising because of lingering uncertainty there.

“There may not be much deal activity in Europe right now, but PE firms want to get their pipelines ready for once it is time to buy,” the source suggested. PeHUB and Thomson Reuters data show that LBO shops have been raising funds and striking deals selectively.

AXA Private Equity put together a $1.3 billion fund for European infrastructure plays and KKR reportedly doubled down on European rescue debt funding. Swedish LBO shop EQT also loaded up for infrastructure plays during the quarter.

Despite the damper, some consumer plays have earned private investors. Yemeksepeti, the Turkish online food ordering service, secured capital from General Atlantic, HIG Europe has made a number of plays and AXA has also been active.

Carlyle again put some of its existing European fund capital to use when it used that fund to in part provide equity for its acquisition of the car paints unit of DuPont. And the LBO shop—which has been the most active of 2012 in terms of buys—wasn’t done with Europe spending there; Carlyle also snapped up a minority stake in Turkish lingerie and swimwear maker Penti, which attracted interest of other LBO shops including CVC.

Image Credit: Shutterstock.com