European PE Asset Handbook
Table of contents
Introduction
Chapter 01: Subsector & Regional Scorecards
Our quantitative scorecards are based on a consistent framework that gives you a quick snapshot of subsectors and regions that could be attractive for PE investors. We’ve taken a first principles approach to our scorecards, keeping it simple, taking into account metrics that matter (growth, profitability, buy-and-build, leverage and EBITDA multiples).
By region, France, Italy and CEE jump out as attractive sectors for investment. France shines on high profitability, CEE on high growth and Italy on low multiples. UK and DACH are bottom of the pack for most metrics. As we highlighted in our State of European PE report, we are already seeing a shift in deal activity away from the UK and DACH and into France and Italy.
Chapter 02: A Quest for Growth
Value creation in private equity can happen in multiple ways: (i) increasing profitability, (ii) achieving multiple expansions, (iii) reducing leverage or (iv) driving growth. However, evidence suggests that growth and multiple expansion are the most important levers.
Bain's & McKinsey’s recent study found that a large proportion (~50%) of value creation for global PE buyout funds was through revenue growth. The rest was multiple expansion. And you could argue that the multiple in itself is dependent on revenue growth.
By subsector, growth is highest in Energy, Biotechnology, Banking and TMT sectors (Telecom, Software and Technology). Energy was a surprise there. Our coverage in the sector is quite broad, encompassing many renewable and EV distribution plays which had significant tailwinds from record-level of energy prices in 2021 and 2022 combined with regulatory stimuli.
Chapter 03: Subsector Deep Dive
Consumer Goods subsector trades in line with the market, with assets having a similar growth and margin profile to the overall median, exhibiting limited to no deviation over the years.
Firms in the subsector rarely do add-ons: only 23% of these companies have acquired another asset in the last 5 years (vs. 38% for the whole market).
The subsector tends to be more international than average, with 42% of businesses getting a high proportion of their sales (>50%) from international markets (vs. 30% for the overall market).
Food is one of the slowest-growing subsectors, with a median revenue CAGR of 6.5% (vs. 7.9% for the overall market).
The subsector also has limited opportunities for buy-and-build (only 29% of assets do acquisitions in the subsector vs. 38% for the overall market). Additionally, EBITDA margins are among the lowest (4th lowest at 7% vs. 10% for all sectors).
Other than growth and margins, the subsector is middle-of-the-pack for most other metrics, e.g. FTE growth, revenue / FTE, CAPEX / Sales or the multiple.
Chapter 04: PE Penetration and Market Concentration
PE penetration is highest in Infrastructure, Technology, MedTech and Software. Infrastructure assets typically generate predictable, long-term cash flows making them suitable for PE-backing, while Technology and Software boast one of the highest growth rates and margins across industries.
Asset availability is highest in Industrials, Consumer and Services sectors. 72% of the investable asset pool in Europe is in those sectors followed by TMT (11%) and Science & Health (8%).
Methodology
The data for this report comes from Gain.pro. Our focus for this analysis were “investable” assets HQ’d in Europe that fit within the private equity sweet spot.
The population we have used is family-owned and PE-owned assets in Europe. We excluded VC-backed and listed assets from our analysis. VC assets often have lower margins and listed assets are a category so their exclusion made sense.
We also restricted our analysis to assets that had cleaned financials with hand-curated profiles on Gain.pro (12-14+ hours primary research).
Unless stated otherwise, the financial metrics in the report are last reported. Where possible, we have used 2023 metrics. In cases where 2023 numbers are still being reported, we have relied on 2022 metrics.
All EBITDA related metrics such as EBITDA margin and EV/EBITDA multiples exclude Banking and Insurance from calculations.
