‘Scale’ and ‘breadth’ will be private equity buzzwords this year as a huge 70pc of GPs plan to invest outside their home country.
Cross-border deals are expected to pick up momentum with a third considering opportunities in North America, 22pc in Asia and 21pc in emerging markets.
The IPEM 2020 Pan European survey signals optimism in the European private equity market. Only 40pc of European GPs fear a major economic correction over the next 12 months. Concerns over Brexit have also eased for GPs outside the UK.
With a strong appetite from asset managers, family offices, insurance companies and pension funds, Europe’s GPs are expecting new entrants to appear on the horizon. In fact, almost 60pc of respondents expect the number of GPs to increase in the coming months, especially in the Benelux region.
Limited partners are continuing to favour private markets in a search for outsized returns but they’re still challenging. High valuations are a major concern – 86pc of respondents said that stratospheric prices are an important issue for the industry, up from 79pc last year.
Over 40pc of GPs expect valuations to carry on climbing in 2020 which makes it more difficult to pinpoint attractive investment opportunities. Small and mid-cap managers are particularly worried about competition and pricing. Fundraising prospects are also weaker in this part of the market.
The pharmaceutical and healthcare industries was revealed as the number one target sector for buyout funds in Europe, cited by 72pc of respondents as an area of interest – a sharp increase on last year.
Cyber security has entered the top three most attractive segments for venture capital and growth investors.
“Despite the palpable caution of private equity professionals about the European economy, this barometer outlines the excellent mood of the industry at the start of 2020,” says Antoine Colson, chief executive at IPEM.
“While the high valuation environment is expected to last – and even worsen – European GPs are showing strong confidence in their model and in the asset class. The expected increase in cross-border deals is also confirming that private equity has really become an industry at a continental scale.”
Results of the survey come ahead of the IPEM 2020 exhibition, bringing together 29000 GPs, LPs, lenders and advisers for a three-day conference in Cannes.