The European private equity sector continues its impressive performance in the mid-market segment. According to Invest Europe, an annualised return (IRR) of 16.9 per cent was achieved as at the end of 2023, accelerating from the prior year (16.55 per cent) and demonstrating just how attractive this asset class is. This figure has a strong leap over the 7.15 per cent generated by the equivalent European public equities benchmark over the same period and far ahead of the 13.29 per cent return of its North American peers.
A stable contribution to the European economy
SMEs have always been the backbone of the European economy. As well as helping businesses with succession planning and growth strategies, private equity is a driving force for innovation in key industries. The Invest Europe study findings highlight the importance of mid-market enterprises for investors who are looking to capitalise on stable long-term returns.
Strong collaboration – a key success factor
The total of 215 billion euros invested during the period from 2019 to 2023 demonstrates the scope of support provided to SMEs by private equity with a view to boosting their competitiveness. Sectors such as technology, healthcare and renewable energy in particular benefit from the financial investments and management insights of private equity funds.
Opportunities for investors – attractive returns combined with social benefits
During the time span of 2019 to 2023, fund investors committed fresh capital of 186 billion euros, with pension funds and insurance undertakings accounting for about half of this. Attractive returns of capital not only reflect the growth of private equity investees but also underscore another key aspect for society: that the returns generated by pension funds contribute to the pensions of European citizens. And furthermore, Enterprises backed by mid-market private equity created over 160,000 net new jobs between 2021 and 2022, equating to 7.9 per cent employment growth and virtually four times the European job creation total of 2.0 per cent. These jobs were added in businesses at the heart of Europe’s digital and sustainable transformation, with 20 per cent more workers hired in the energy and environment sector, 15 per cent more in Information and Communication Technology, and 10 per cent in finance and insurance, a sector fuelled by Europe’s strength in dynamic fintechs – the remaining jobs are related to other industries.
Jannick Hunecke, member of the Board of Management of Deutsche Beteiligungs AG, said: “Mid-market private equity is a crucial link in the European ecosystem that generates growth throughout the continent. If the private equity sector is the cornerstone of the European economy, then SMEs are the rock upon which that economy is built. The interaction between private equity investors and mid-sized enterprises works very well indeed. In the kind of challenging market conditions seen during the pandemic or in the present climate, private equity funds help their portfolio companies to optimise supply chains and deal with geopolitical turbulence while also exploring new markets and developing new products and services.”
DBAG has a clear focus on mid-sized enterprises and a resilient network built over decades of being an active market player. This, together with its vast experience and ability to facilitate bilateral transactions by leveraging its direct contacts to SMEs, means that it is ideally positioned to continue playing an active role in the overall success story of mid-market private equity.