Across Europe, financial investors are helping SMEs to generate growth, develop transformative technologies and drive innovation. And they are pretty successful at it: Mid-market private equity returned 16.55 per cent to investors to the end of 2022, outperforming funds focused on small, large and mega-cap European buyouts, as well as those from North America and the rest of the world. These are key takeaways from the latest Mid-Market Private Equity report published by Invest Europe, the association representing the private equity, venture capital and infrastructure sectors in Europe.
Between 2018 and 2022, private equity invested more than 212 billion euros in European small and medium-sized enterprises – a volume in excess of Greece’s gross domestic product.
Private equity driving employment growth
SMEs backed by private equity in Europe created 116,800 jobs in 2021. This corresponds to employment growth of 6.9 per cent and is well above the European average of 1.2 per cent. The European SME sector employed 3,678,250 people at the end of 2021, accounting for 35 per cent of all jobs supported by private equity in Europe. In 2022, the finance and insurance sectors as well as information and communications technology in particular recorded the highest growth rates, at 15 per cent each. The current Invest Europe report not only highlights the economic value created by private equity firms focused on SMEs; it also looks at investment patterns and profiles, emphasising long-term growth capacity and strategic flexibility. Over the last ten years, the volume of investments in the SME sector has more than tripled, from 14 billion euros in 2013 to 46 billion euros in 2022. Aggregate investments amounted to 212 billion euros for the period from 2018 to 2022, while the capital raised grew to 194 billion euros, up by more than 50 per cent compared to the preceding five-year period.
Private equity supporting SMEs is a European strength
The European SME sector plays a key role in the private equity value creation chain. This in turn helps business owners scale their business models, improve operational processes, and explore new markets. SMEs have always been – and continue to be – a strong source of investment in businesses, value creation and jobs. This broad and diverse private equity segment is crucial to supporting businesses, assisting them in facing the current macroeconomic challenges, for example, and helping them to emerge as even stronger European champions.
And this strength is also reflected in the development of assets under management or advisory, which totalled a record 318 billion euros at the end of 2022 – more than double the figure in 2013. The funds available for investment – also known as “dry powder” – have also more than doubled in the same period, to 95 billion euros. This clearly shows the scope for further investment in new and existing businesses across Europe. Invest Europe’s Mid-Market Private Equity report is available on investeurope.eu (Invest Europe membership is required for download).