US private equity hits 4-year high in Europe as UK deal value tumbles

US-based private equity and venture capital firms' investments in Europe rose 3.16% year over year to $72.14 billion in 2025, the highest annual total since 2021, according to S&P Global Market Intelligence data.

US private equity firms are drawn to Europe's attractive valuations and fragmented markets that facilitate buy-and-build strategies, said Jed Constantino, principal and research consultant at capital markets firm Meketa Investment Group Inc.

Not only are big buyout firms like Thoma Bravo LP, which closed its first European fund in 2025, seeking opportunities in Europe, but smaller firms as well. US-based middle-market private equity and venture capital activity is also picking up, he added.

"We've started to see middle-market firms either send over an investment professional or set up an office in the UK or Europe to source and execute deals. Some have even created European-focused strategies to complement their US flagship funds."

Firms that have opened offices in Europe in recent years include Pacific Avenue Capital Partners LLC and MiddleGround Management LP. In January, H.I.G. Capital LLC closed its European lower middle market fund at €1.6 billion.

Buyout and venture firms are increasingly focused on Europe's defense sector, Constantino said.

European defense spending could reach about €800 billion by 2030, following an agreement among European NATO countries to increase defense spending to at least 3.5% of their GDP, according to a McKinsey & Co. Inc. report.

"Historically, the [defense] sector has seen significantly less private investment in Europe than in the US," Constantino said. But European investment opportunities are emerging "as geopolitical considerations and spending priorities evolve."

Opportunity in healthcare

Healthcare is another targeted sector in Europe, accounting for half of the 10 biggest US private equity-backed deals in the region in 2025. Notable transactions included GTCR LLC's $4.8 billion acquisition of pharmaceutical company Zentiva Group as and the $1.8 billion acquisition of Swixx Biopharma SA by an investor group that included New York-based SK Capital Partners LP.

Within healthcare, biotechnology could become a significant investment target in Europe, particularly for venture capital firms, according to Steve Novakovic, managing director of curriculum at the Chartered Alternative Investment Analyst Association.

The US political and regulatory environment has "disincentivized a lot of research and development on certain types of healthcare opportunities," Novakovic said.

In August 2025, for example, the US Department of Health and Human Services halted mRNA vaccine development activities under the Biomedical Advanced Research and Development Authority, affecting 22 projects worth nearly $500 million.

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"[Venture capital firms] have no incentive to back companies using [mRNA] technology or other biotechnology solutions that are not favored by the current administration, but have traditionally been supported by government agencies because they know there are no near-term prospects," Novakovic said.

"You might see a pickup in venture capital activity in European healthcare as a result of what's happening in the US."

Infrastructure assets, particularly those tied to renewables, are another potential target for US capital, he added. The EU's Global Gateway strategy aims to mobilize up to €300 billion in investments from 2021 to 2027 to enhance sustainability and security in areas such as digital, energy and transport.

Top markets

Across European markets, Constantino identified the DACH region, comprising Germany, Austria and Switzerland, as an area with concentrated US investment due to market maturity.

Five of the 10 largest US firm-backed deals in Europe in 2025 targeted the DACH region, including the year's largest transaction: the $7.84 billion acquisition of Germany-based energy firm Techem GmbH.

Thoma Bravo's $10.55 billion acquisition of The Boeing Co.'s digital aviation solutions, including Netherlands-based AerData BV, was excluded from the analysis because three of the four targeted assets are US-based.

US investment in UK drops

In contrast to Europe, US private equity and venture capital activity in the UK declined in 2025. Deal value fell 36.79% year over year to $32.76 billion across 442 transactions, according to Market Intelligence data.

The financial sector dominated the 10 largest deals involving US private equity and venture capital firms, accounting for four of them. These included the market's largest: the $6.1 billion acquisition of asset manager Janus Henderson Group PLC.