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As M&A collapses, PE shrugs

It was almost guaranteed that M&A would fade a little after the year we’ve just had, but no one was expecting the kind of drop-off seen in Q1 2022. European M&A totalled US$229 billion in the period, a 44% decline from the previous quarter.

For European investors, Russia’s invasion of Ukraine has been too close to home, preventing big-ticket buyers from transacting. In January, February and March, dealmaking failed to reach the US$100 billion mark across the wider EMEA region—for context, there were only three months that did not hit that threshold between September 2020 and December 2021.

In total, deals worth more than US$2 billion fell to a combined US$120.4 billion in EMEA, the lowest quarterly value for this category since Q3 2020, when the M&A world was just recovering from the global lockdown. Quarterly deal count numbers were also the lowest on Mergermarket record going back to Q1 2006.

No sweat equity 

And yet, despite the drop, private equity (PE) has barely blinked—financial sponsors dipped into their reserves to put US$57 billion to work. This makes Q1 2022 the sixth successive quarter in which EMEA buyout value has topped US$50 billion, the first time this has been achieved stretching back to at least 2008. PE’s share of the M&A pie has also crept up, from 20.2% last year to 22.2% in the quarter just closed.

Tech has continued to be a bright spot for EMEA M&A, remaining the most active sector by both value and volume with just over 28% of the deals announced this year. The PE industry could continue to buoy the market by supplying it with tech-related assets.

IDnow, Bitdefender and IRIS Software Group, all of which count sponsors as major shareholders, are being primed for exit. In the case of Bitdefender, a Romanian cybersecurity firm, Mergermarket reported in February that a public listing was on the cards. However, the war in Ukraine has closed the IPO window for now, which means Bitdefender may be another one for the M&A scorecard.