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EMEA Deal-Making Muted in Q4 2020, With No Mega Deals in Sight

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EMEA Deal-Making Muted in Q4 2020, With No Mega Deals in Sight

Relative to the previous quarter, where mega deals aided the growth in aggregate deal value, as reported in PEMS Issue 27, deal-making in the fourth quarter of 2020 was slow. Large deals were completed months earlier than usual, compared with 2019, where there was a robust pipeline of deals right up to the end of the year, as reported in PEMS Issue 24.

Global General Partners’ (GPs’) investments in Europe, the Middle East and Africa (EMEA) dropped 67% year-over-year, from €53.6bn in Q4 2019 to €17.7bn in Q4 2020. However, the number of completed deals declined only 10% year-over-year, from 1,486 in Q4 2019 to 1,336 in Q4 2020. The lack of large-entry deals (those valued at €1.0bn or more) in the fourth quarter of 2020 significantly affected aggregate deal value. In 2019, there were eight large deals completed, with an aggregate value of €36.0bn.

The Nordics were the only region in EMEA that reported a growth in deal value, receiving €2.6bn across 132 completed deals in Q4 2020, compared with €1.3bn across 123 completed deals in Q4 2019. The softness in deal-making during the fourth quarter, however, was most pronounced in the UK, Rest of Europe (RoE), and Germany. Aggregate deal value in the UK plummeted 77%, to only €4.7bn across 331 completed deals in Q4 2020, compared with €20.8bn across 301 completed deals in Q4 2019. Similarly, RoE targets only received €2.2bn of capital across 152 completed deals in Q4 2020, 78% lower than Q4 2019, which saw €9.9bn in capital received across 190 completed deals. Capital deployed in Germany also nosedived to an aggregate of €2.4bn across 167 deals in Q4 2020, compared with €7.7bn across 201 deals in Q4 2019. The most heavily impacted sector was Communication Services, where aggregate deal value was reduced by 89% to a total of €2.1bn across 135 deals, compared with €19.6bn across 153 deals in the comparable quarter of the previous year.

Divestment activity in EMEA was stronger than expected during the fourth quarter of 2020. Aggregate capital realized increased by 5% year-over-year to €25.2bn in Q4 2020, compared with €24.0bn in Q4 2019. The number of completed exits deals also dropped 34% year-over-year, from 317 in Q4 2019 to 236 in Q4 2020. Two exit deals involving French targets notched a €1.0bn+ valuation during the quarter.

Table 1: Completed exit deals in EMEA valued at €1.0bn or more in Q4 2020.

Target Name

Target Region

Primary Industry

Buyer

Seller

Deal Value (€bn)

Ingenico Group - GCS

France

Trading Companies and Distributors

Worldline S.A.

Bpifrance Investissement SAS

€11.0

CPA Global Group Holdings Limited

United Kingdom

Research and Consulting Services

Clarivate Plc

Leonard Green & Partners, L.P.; Castik Capital Partners GmbH; Partners Group AG

€6.0

Covage Networks SAS

France

Alternative Carriers

SFR FTTH

Partners Group Holding AG; Cube Infrastructure Fund; Cube Communications Infrastructure S.C.A.

€1.0

Source: S&P Global Market Intelligence. For illustrative purposes only.

Asia Captured EMEA GP’s Attention

EMEA-based GPs’ aggregate capital deployed globally dropped 46% to total €36.7bn in the quarter, compared with €67.4bn in Q4 2019. However, the number of completed entry deals only declined 4% year-over-year, from 1,703 to 1,635. Only three large deals with an aggregate value of €4.4bn, all of which involved Asian targets, were entered by EMEA-based GPs during the fourth quarter, compared with 12 large deals with an aggregate value of €40.9bn in Q4 2019.

Table 2: EMEA-based GPs’ completed entry deals valued at €1.0bn or more in Q4 2020

Target Name

Target Region

Primary Industry

Buyer

Deal Value (€bn)

Aviva Ltd.

Asia

Multi-line Insurance

TPG Capital, L.P.; Aberdeen Asset Management Company Limited; Singapore Life Pte. Ltd.; Ipgl (Holdings) Limited;

€1.7

Guiyang Huochebang Technology Co Ltd

Asia

Application Software

Permira Advisers Ltd.; GGV Capital; Baillie Gifford & Co.; Fidelity Management & Research Company LLC; Hillhouse Capital Management, Ltd.; Sequoia Capital China; Yunfeng Capital;

€1.4

Xiaochuan Chuhai Education Technology (Beijing) Co., Ltd.

Asia

Interactive Home Entertainment

Tiger Global Management LLC; Sequoia Capital China; FountainVest Partners; Alibaba Group Holding Limited; SoftBank Vision Fund L.P.; SoftBank

€1.3

Source: S&P Global Market Intelligence. For illustrative purposes only.

Asia won all high-value investments of EMEA-based GPs during the fourth quarter. As a result, aggregate capital deployed to cross-border targets only declined by 21% year-over-year, from €26.5bn in Q4 2019 to €20.9bn in Q4 2020, with the number of completed deals rising 13% year-over-year, from 368 in Q4 2019 to 414 in Q4 2020. On the other hand, investments in EMEA-based targets were significantly reduced to only €15.4bn in the quarter, compared with €40.8bn in Q4 2019. The number of completed deals, however, only declined by 9%, from 1,335 in Q4 2019 to 1,211 in Q4 2020.

EMEA-based GPs’ aggregate capital realized from divestments more than doubled year-over-year to total €51.8, compared with €18.0bn in Q4 2019, despite the number of completed exit deals decreasing 18% year-over-year, from 321 in Q4 2019 to 262 in Q4 2020. Eight large exits deals valued at €41.6 were completed by EMEA-based GPs during the fourth quarter.

Table 3: EMEA-based GPs’ completed exits deals involving cross-border targets valued at €1.0bn or more in Q4 2020

Target Name

Target Region

Primary Industry

Buyer

Seller

Deal Value (€bn)

Livongo Health, Inc.

North America

Health Care Technology

Teladoc Health, Inc

Threshold Ventures; Humana Venture Capital

€16.0

Postmates Inc.

North America

Application Software

Uber Technologies, Inc.

Glynn Capital Management; Matrix Partners; CrossLink Capital, Inc.

€2.3

VelosBio, Inc.

North America

Biotechnology

Merck & Co., Inc.

Pappas Capital, LLC; Venrock; OrbiMed Advisors LLC;

€2.3

Central European Media Enterprises Ltd.

Latin America

Broadcasting

TV Bermuda Ltd.

Apax Partners LLP; Warner Media, LLC

€1.9

PT.Softex Indonesia

Asia

Personal Products

Kimberly-Clark Corporation

CVC Capital Partners Limited; CVC Capital Partners Asia Pacific IV, L.P.

€1.0

Source: S&P Global Market Intelligence. For illustrative purposes only.

Deal-making within the venture capital (VC) segment was evidently more fruitful. Global VCs deployed €5.6bn of capital in the EMEA region across 784 deals in Q4 2020 – a 44% increase over the €3.9bn in capital deployed across 888 deals in Q4 2019. Financials and Healthcare sectors were the focus of investments among VC firms. EMEA-based VCs also increased capital deployment globally to €9.6bn across 967 deals during the quarter, compared with €6.7bn across 1,022 deals in Q4 2019.

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