2022

T H E I N S I G H T:
KEEPING AN EYEON THE HORIZON
European private
equity should stayon track despite the
bumpy road ahead

IN PARTNERSHIP WITH:

CONTENTINTRODUCTION
1.

3R O B U S T M E D I U M -T E R M
F U N D R A I S I N G E X P E C TAT I O N S

62 . 	I N V E S T M E N T O U T L O O K W E A K E N S ,CONFIDENCE PERSISTS IN TOP SECTORS
3.

8

DIVESTMENT OUTLOOKW E A K E N S I N W O R S E N I N G C L I M AT E

104 . 	I N F L AT I O N L E A D S C O N C E R N S A M O N G
GPs & LPs
5.

14

AT T E N T I O N T O “ G R E E N ” T O P I C S ,ESG & DIVERSIT Y TO INCREASE

6.

16

D I G I TA L I Z AT I O N R E M A I N S L E A D
O P E R AT I O N A L I N I T I AT I V E F O R G P s

CONCLUSION

18
19

ARTHUR D. LITTLEINVEST EUROPE

JONAS FAGERLUNDJULIEN KRANTZ

Partner, Private Equity
Swedenfagerlund.jonas@adlittle.com

Research Director
julien.krantz@investeurope.eu

GUILLAUME PICQ
Partner, Private Equity
Francepicq.guillaume@adlittle.com
General disclaimer
This Report was commissioned by Invest Europe on terms specifically limiting the liability of Arthur D. Little (ADL).
ADL’s conclusions are the results of the exercise of its best professional judgment, based in part upon materials andinformation provided to ADL by Invest Europe, secondary research, and expert interviews conducted by ADL. Use ofthis Report by any third party for whatever purpose should not, and does not, absolve such third party from using due
diligence in verifying the Report’s contents. Any use that a third party makes of this document, or any reliance on it, ordecisions to be made based on it, are the responsibility of such third party. Neither ADL nor Invest Europe accepts any
duty of care or liability of any kind whatsoever to any third party, and/or any responsibility for damages, if any, suffered byany third party as a result of decisions made, or not made, or actions taken, or not taken, based on this document.

2

ARTHUR D. LITTLEINTRODUCTION
The rapid rebound from the economic effects of
COVID-19 has given way to a new set of macro andgeopolitical challenges. The war in Ukraine and theensuing energy crisis combined with soaring inflation
and rapidly rising interest rates have created a more
uncertain and volatile outlook in Europe. Yet against
these unraveling conditions, private equity (PE) has
continued to operate as an essential part of theeconomy. First half totals in 2022 for fundraisingand investment are among some of the highest everrecorded, even if down from 2021’s record levels, while
divestments have continued at a relatively steady pacedespite the severe headwinds affecting many exit
routes.
Arthur D. Little (ADL) and Invest Europe’s European PE
survey, combined with Invest Europe’s first half data,bring together recent statistics that give fresh insight
into the period just passed, with fund manager andinvestor opinion that informs us about the path forward
for the industry. Both general partners (GPs) and limited
partners (LPs) expect a more challenging environmentthat will have repercussions for fundraising, investment,
and divestment activity in the near term. Longer term,
however, there are positive expectations for fundraising
as investors foresee commitments to private equity to
be as high — or higher — than they are today.
PE firms and their investors are fully aware of the risks— from inflation and supply chain disruption to rapidly
rising interest rates and geopolitical instability — but
are also clearly focused on the opportunities.

3

R E P O R T — T H E I N S I G H T: K E E P I N G A N E Y E O N T H E H O R I Z O N

Helping portfolio companies to embrace the future
through operational improvements focused on
digitalization and sustainability are seen as key ways to
unlock value, alongside bolt-on acquisitions and measuresto drive internationalization and organic growth.
Understanding, embracing, and delivering on
environmental, social, and governance (ESG) represents
one of the greatest challenges for the PE industry. It
is one that GPs are addressing, with the vast majority
placing greater attention on ESG factors as well as
issues surrounding diversity and inclusion. It is clear thisis not a short-lived intention but a secular shift, withmany GPs looking at the creation of “green” funds thatwould set a very clear direction for the industry for years
and decades to come.
Together, the data from the first half of the year and
the PE survey paint a clear picture of the challenges
and the opportunities for European private equity. The
industry has traversed a volatile period already in 2022
and expects more short-term uncertainty. But over the
longer term, European private equity is preparing for agreener future, incorporating ESG factors even more
firmly at its core, with the full support and commitment
of investors.

4

ARTHUR D. LITTLE

5

R E P O R T — T H E I N S I G H T: K E E P I N G A N E Y E O N T H E H O R I Z O N

1 . R O B U S T M E D I U M -T E R M
F U N D R A I S I N G E X P E C TAT I O N S

After a record year for European PE fundraising

In addition to any macroeconomic concerns,

in 2021, institutional investors’ capital

there are technical considerations at play incommitments to the asset class remained

PE allocations. With European equity markets

strong in the face of geopolitical and economic

seeing significant decreases since the startconcerns. Funds raised €64 billion in the firstof the year, allocations by asset class goinghalf of 2022, in line with last year’s first half

forward may be impacted. In other words, they

results, with continued strong performance

may be overallocated to private equity, whichacross all segments, including private equity

could put new commitments on pause untiland venture capital.

portfolios are rebalanced. As a result, a large
majority of GPs expect fundraising to be weaker

UK and Ireland, and France and Benelux,in the coming 12 months compared with the priorcontinue to dominate fundraising on ayear (see Figure 2).

geographical basis (see Figure 1). As ever,
distribution of fundraising tends to reflect
the domicile of funds rather than the ultimate
destination of that capital, with investment in
the first half of 2022 more evenly spread acrossthe continent.
Despite continued strong support for PE funds
in the first half of 2022, LPs and GPs alike arenotably less optimistic about the short-term
outlook for fundraising.

FUNDS RAISED€64 BILLION IN THE
FIRST HALF OF 2022,
IN LINE WITH L AS T Y E A R ’ S
FIRS T H A LF RE S ULT S

Figure 1. Funds raised by European private equity and venture
capital funds
Figure 2. Fundraising (next 12 months vs. laFigure 1. Funds raised by European PE and venture capital funds
UK & IrelandSouthern Europe

Germany, Austria & Switzerland

France & Benelux

Nordics

Central & Eastern Europe€ bn

vs. last 12 months)

Stronger

70

66

60

57

18

54
20

40

52

30

10

10
3

2

H1-20

2
0.4

7
1

19

3

H2-20

1

21.6%

Weaker

72.4%

5

21

5

Neutral

21

5

18

20

23

17

17

39

6.0%

64

50

0

Figure 2. Fundraising (next 12 months

7
3

H1-21

5

3

H2-21

13
1

2.4
H122

0.3

0%

20%

40%

Source: Arthur D. Little, Invest Europe

Source: Investing in Europe: Private Equity Activity H1 2022, Invest Europe

Source: Arthur D. Little, Invest Europe

6

Source: Arthur D. Little, Invest Europe

60%

80%

100%

ARTHUR D. LITTLE

In the medium term, LPs remain drawn to thebut could unlock significant funds in new

asset class and its proven ability to outperformfunding for private equity. In the PE survey,

and deliver superior returns throughout

some 80% of the GP respondents confirmed

economic cycles. Nine out of 10 LPs expect

an interest to market future funds to retailinvestor allocations to private equity to beinvestors including high-net-worth individuals.

higher or unchanged over the next three years(see Figure 3).

“I understand that the GPs may be less optimistic

It is also important to note that the asset

situation. We believe that the coming years will offer

class is still evolving. New funds and vehicles

great opportunities for PE, and we will continue toare taking the PE asset class to a relatively

invest. Consistency in investing over cycles is key.”

about future fundraising considering the macro

untapped retail investor base. The pace andSofie Kulp-Tåg, Senior Investment Manager,

extent of this transformation is hard to assess

Skandia Mutual Life Insurance Company

Figure 3: Capital allocations to PE asset class (next three
years)
Figure 3. Capital allocations to PE asset class (next three years)

LP

2022

In % allocation ofLP’s total European
investments

LP

More

No Change

Less

26.4%

63.9%

9.7%

2021

In % allocation ofLP’s total European
investments

58.8%

0%

20%

40%

60%

38.8%

2.4%

80%

100%

Source: Arthur D. Little, Invest Europe

Source: Arthur D. Little, Invest Europe

7

R E P O R T — T H E I N S I G H T: K E E P I N G A N E Y E O N T H E H O R I Z O N

2. INVESTMENT OUTLOOK WEAKENS,CONFIDENCE PERSISTS IN TOP SECTORS

Persistent inflation, rising interest rates, andthe industry recorded €57 billion of investment,

deteriorating macroeconomic conditions havea 21% reduction compared with the immediately

increasingly weighed on market activity. Private

preceding six-month period (see Figure 4).

equity is not immune, yet has seen resilient

Nevertheless, the total represents the third-bestlevels of investment.by
In thefirst halfinof 2022,
performance from European PE over the
Figure 4. Investments
stagevalue and half-year
volumepast decade.

Figure 4. Investments by stage in value and volume
Venture (RS)Buy-out (RS)Growth (LS)

Growth (RS)Other (LS)

Buy-out (LS)

70

6

4,000

57
1

outlook for investment over the coming 12months than they were this time last year. Some

15

1
1

the averages of the last five years.
However, GPs are less optimistic about the

16

19

48
43

3,000

30% of GPs consider the outlook to be stronger

10

compared with over 50% who forecasted better

30
30

31

6

6

H1-20

H2-20

opportunities last year. In addition, fewer GPs

2,000

45

33

31

are neutral on the investment outlook, while thenumber expecting a weaker environment has risen

1,000

10
0

outs have normalized to be more in line with

5,000

72
1

66
3

60

20

levels close to records set last year, while buy-

No. of companies

80

40

and growth investment continued to track at

Venture (LS)

€ bn

50

First half data shows that both venture capital

11

10

10

H1-21

H2-21

H1-22

sharply to over 40% from under 10% last year (seeFigure 5).

0Note: LS = Left scale; RS = Right scale
Source: Investing in Europe: Private Equity Activity H1 2022, Invest Europe

Figure 5. Perception of investment opportunities in themarket (next 12 months vs. last 12 months)
Figure 5. Perception of investment opportunities in the market (next 12 months vs. last 12 months)

Note: LS = Left scale; RS = Right scale
Source: Arthur D. Little, Invest Europe

GP

2022

GP

2021

29.9%
Stronger
51.7%

28.4%
Neutral
40.8%

41.8%
Weaker
7.5%

0%

10%

20%

Source: Arthur D. Little, Invest Europe

8

Source: Arthur D. Little, Invest Europe

30%

40%

50%

60%

70%

80%

90%

100%

ARTHUR D. LITTLE

The investment focus of PE firms by type ofConfidence in finding opportunities in top sectors

transactions is shifting, reflecting in part theremains positive, with over 90% expecting at least

market dynamics and economic pressures affecting

the same degree of activity in each sector over thelarge businesses across Europe (see Figure 6).

coming 12 months (see Figure 7). Expectations forOver half of GPs expect more public-to-private

renewable energy investments have strengthened,transactions compared with under a quarter

while those for life sciences and healthcare have

who did last year. Almost half also expect more

weakened — but both remain strongly positive withcorporate spin-offs, again illustrating the need formore than 50% expecting higher investment.

multinationals to rationalize their operations in the“There are noticeably fewer investment opportunities

face of a downturn and deliver value to shareholders.

for transactions requiring significant leverage.

In contrast, a smaller number of GPs expect more

I think that will remain the case for the remainder

primary and secondary investments than lastof the year.”year — and a larger number expect fewer primary

Figure
6. Expectedmarket12Partner,
Louis
Godron,(nextManagingand secondary
investments. changes in private equity
Argos
Wityu
months vs. last 12 months)
Figure 6. Expected changes in PE market (next 12 months vs. last 12 months)
GP

2022

More

Less

0%

28%

10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

2021

More

Same

19%
8%

60%

32%

Corporate spinoffs

Less

58%

23%

Public-to-private deals

39%

61%

10%

State-owned privatizations

24%

41%

20%

Primary market

16%

40%
38%

38%

Secondary market

Secondary market

48%

49%

Primary market

49%

43%

3%
8%
23%

68%

10%

State-owned privatizations

14%

31%

45%

Corporate spinoffs

GP

Same

55%

Public-to-private deals

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Figure 7. Expected
investment operation activity per top fivesectors
compared to last 12 months
Source: target
Arthur D. Little, Invest
EuropeSource: Arthur D. Little, Invest Europe

Figure 7. Expected investment operation activity per top five target sectors compared to last 12 months
2022

GP

HigherRenewable energy

Same

Lower

33%

63%

Life science & healthcare

40%

54%

Higher4%

Renewable energy

6%Life science & healthcare

6%

Biotech/medtech

Biotech/medtech

46%

Agro business

40%

51%

9%

Agro business

ICT

35%

59%

6%

ICT

0%

20%

2021

GP

48%

40%

60%

80%

100%

Same

Lower

40%

58%

25% 1%

75%

32%

64%

58%
0%

20%

40%

60%

4%

9%

45%

46%

2%

39%

3%

80%

100%

Source: Arthur D. Little, Invest Europe

Source: Arthur D. Little, Invest Europe

9R E P O R T — T H E I N S I G H T: K E E P I N G A N E Y E O N T H E H O R I Z O N

3. DIVESTMENT OUTLOOKW E A K E N S I N W O R S E N I N G C L I M AT E

PE divestment activity softened in the first half

Venture capital divestments were marginallyof 2022, coming off high levels last year. Funds

higher, however, illustrating the growing scaledivested some €14 billion of assets compared withand success of the industry across Europe.

€22 billion in the second half of last year, which

Macro concerns, high inflation, and rising interest

was the strongest six-month period for exits since

Figure 8. 2017
Divestments
by stage in value andrates
volume— not to mention increased energy volatility(see Figure 8).
and geopolitical tension — have impacted the exit
environment. As a result, more than 60% of GPs

Figure 8. Divestments by stage in value and volume
Venture (RS)Buy-out (RS)Growth (LS)

Growth (RS)Other (LS)

Buy-out (LS)€ bn

12 months, compared with just 3% who expected aweaker period this time last year (see Figure 9).

No. of companies

25

1,000

22
1
19
1

20
16
1

15
10

10

expect divestments to be weaker over the coming

Venture (LS)

2

7

0

1

MORE THAN 60% OF GPs
E XPECT DIVESTMENTS
TO BE WE AKER OVER
THE COMING 12 MONTHS

800

4

700

4

14
0.2

3
0.3

600
3

500
400

16
13

10

5

900

300

10

200
100

2

2

2

1

0

H2-20
H2-21 in divestments
H1-21
H1-22
FigureH1-20
9. Expectedchangesof portfolio
Notes: Some periods do(nextnot sum due 12
to rounding;LS = Left scale;
RS =last
Right scalecompanies
monthsvs.
12 months)
Source: Investing in Europe: Private Equity Activity H1 2022, Invest Europe

Note: LS = Left scale; RS = Right scale
Source: Arthur D. Little, Invest Europe

Figure 9. Expected changes in divestments of portfolio companies (next 12 months vs. last 12 months)
GP

2022

Stronger

GP

Stronger

9.7%

Neutral

Weaker

10

40%

60%

Source: Arthur D. Little, Invest Europe
Source: Arthur D. Little, Invest Europe

80%

33.3%

Weaker

61.9%

20%

63.3%

Neutral

28.4%

0%

2021

100%

3.3%

0%

20%

40%

60%

80%

100%

ARTHUR D. LITTLE

That shift in sentiment is mirrored by the number

situations to be more common in the next 12of GPs who now think that divestments will bemonths, while a quarter expect management

stronger — under 10% — in contrast to over 60%

and owner buy-backs to be more frequent.

last year.

Expectations for IPOs have dropped sharply,
echoing the decline in this exit route this year,

It is important to note that GPs retain a strong

which accounted for only 4% of divestment value

degree of flexibility in when they choose toat cost in the first half of the year. Seven out ofexit. The strong year for divestment last year,
combined with the emergence of longer-duration
funds and new vehicles to hold assets for the longterm, provide options for both LPs and GPs.

eight GPs expect IPOs to be less common overthe next year, while just 13% expect them to be
the same or more frequent. Over a quarter of GPs
also expect auctions to be less common, althoughmore than seven out of 10 believe auctions will

Market volatility and uncertainty have affected

be at least as common over the next 12 months,

GPs’ expected divestment routes as wellindicating
ongoing
for assets among
Figure 10. Expected changes of exit
route
forappetitecompanies
and rival PE funds.
under ownership (next 12 monthsstrategic
vs. last
12 months)(see Figure 10). Over a third expect proprietary

Figure 10. Expected changes of exit route for companies under ownership (next 12 months vs. last 12 months)
2022

GP

More common

Proprietarysituations

9%

60%

16%

57%

10%

14%

27%

87%

3%
0%

Less common

54%

25%

Auctions

IPOs

Same

37%

Management/
owner buy-back

20%

2021

GP

40%

60%

80%

100%

More

Proprietarysituations

19%

Management/
owner buy-back

Less

62%

9%

63%

Auctions

53%

IPOs

49%

0%

Same

20%

28%

48%

40%

40%

60%

0%

11%

80%

100%

Source:Arthur
D. Little,
InvestEuropeSource:Arthur
D. Little,
InvestEurope11

R E P O R T — T H E I N S I G H T: K E E P I N G A N E Y E O N T H E H O R I Z O NValuations are a central consideration for PE“In the current environment, we are spending a lot

firms, affecting both investment and divestmentof time on operational improvement and growth,(see Figure 11). Comparable valuations in

so the companies will be in a better position whenexits occur in more beneficial circumstances.”

equity markets as well as the availability offinancing have had a clear impact on asset price

Kristof Vande Capelle,

expectations. GP and LP views on the valuation

CFO, Gimv

outlook are very similar — in both cases more than
80% expect valuations to be lower in the coming
12 months compared with the previous 12 months.
In contrast, last year, over 90% of LPs and GPs
expected valuations to be higher, a dynamicthat would have helped drive strong levels of

Figure 11. Evolution of PE transaction market (next 12 months
vs.
last
12 earlymonths)of2021
and into
2022.
divestment activity through the second half

Figure 11. Evolution of PE transaction market (next 12 months vs. last 12 months)
2022
Higher

2021
Same

Lower

HigherGP
Valuation
multiples

14.2%

Valuation
multiples

81.3%

4.5%

60.8%

34.2%

5.0%

LP
11.1%

Valuation
multiples

83.3%

5.6%

0%

20%

40%

Source: Arthur D. Little, Invest Europe

Source: Arthur D. Little, Invest Europe

12

Lower

GP

LP
Valuation
multiples

Same

60%

80%

100%

41.2%

0%

20%

2.4%

56.5%

40%

60%

80%

100%

ARTHUR D. LITTLE

13

R E P O R T — T H E I N S I G H T: K E E P I N G A N E Y E O N T H E H O R I Z O N

4 . I N F L AT I O N L E A D S C O N C E R N S
AMONG GPs & LPs

Among the headwinds facing the global economy

interest rates more negatively. However, bothand PE industry, both GPs and LPs rated highgroups were in relative agreement on the impact

inflation as the most negative factor affectingof geopolitical instability. Over 60% of GPs andbusiness operations and performance (seeLPs ranked it as the least or second-least negative

Figure 12). Over 60% of GPs and more than half offactor affecting operations.

LPs ranked higher costs and prices as the mostnegative or second-most negative issue.

“High inflation is one of the biggest issues facing

Among other factors there was some divergencedrivers — higher interest rates, higher costs, andinvestors, as it negatively impacts so many PE returnthe uncertainty of being able to maintain customerof opinion. GPs with direct day-to-day experience

demand and margin in such a challenging andof supply challenges rated supply chain disruptioncompetitive environment.”

more negatively than LPs, while LPs who have

Merrick McKay, Head of Europe —exposure to a range of asset classes ranked

Figure 12. Negatively impacting factors on business
operations
andimpacting
performance
Figure 12. Negatively
factors on business operations and performance
Scale of 1 to 5, where 1 is most negative; 5 is least negative
Higher inflation - GP

31%

Higher inflation - LP

Supply chain disruption - GP
21%

Economic uncertainty - GP

16%

Economic uncertainty - LP

17%

Interest rate increases - LP

6%

23%

19%

31%

16%

23%
15%

17%

22%

12%

Geopolitical instability - LP

15%

8%

15%

1- Most Negative

14

22%

25%

14%
22%

23%

10%

14%

14%

27%

27%
22%

21%

41%

25%
2

7%
7%

15%
18%

33%

11%

13%
21%

15%

26%

14%

Source: Arthur D. Little, Invest Europe

19%

13%

Geopolitical instability - GP

Source: Arthur D. Little, Invest Europe

19%

31%

32%

Supply chain disruption - LP

Interest rate increases - GP

30%

22%

3

36%
4

5- Least Negative

Private Equity, abrdn

ARTHUR D. LITTLE

15

R E P O R T — T H E I N S I G H T: K E E P I N G A N E Y E O N T H E H O R I Z O N

5 . AT T E N T I O N T O “ G R E E N ” T O P I C S ,ESG & DIVERSITY TO INCREASE

The move to more sustainable investments, as

Against an uncertain and volatile macroeconomic

well as robust ESG processes for fund managers,

and political backdrop, GPs and LPs are also

are clearly top of mind for both GPs and LPs alike.

intently focused on issues including geopoliticalMore than 90% of GPs and over 80% of LPs expect

risk and risk management. Almost two-thirds

greater attention to ESG in their daily operationsof GPs also expect to communicate more within the near future (see Figure 13). A large majority

LPs, reflecting the need for enhanced investor

of GPs and half of LPs also expect more attention

reporting on sustainability as well as theto diversity and inclusion as the industry makes

importance of strong investor relations in more

greater efforts to increase participation of womenchallenging periods. In contrast, under 30% of LPs

and minorities at all levels.

expect greater communication, highlighting it asa lower-priority concern for investors. However,
it is worth noting that GPs and LPs almost

expect the same or a higher degree
Figure 13. Expected changes in near future,unanimously
daily operationsof attention to all key topics.

Figure 13. Expected changes in near future, daily operations

GP

LP
2.0%

90.5%

Attention to ESG

Attention to diversity
and inclusion issues

81.8%

0.7%
17.6%

Attention togeopolitical risk

80.4%

19.6%

Attention to risk
management

72.3%

Investor relations
communications
toward LPs

20%

40%

60%

Source: Arthur D. Little, Invest Europe

49%

64%

0.7%

80%

100% 0%

50%

29%

20%

No change

1.0%

36%

50%

37.8%

More
Source: Arthur D. Little, Invest Europe

17%

50%

27.7%

61.5%

0%

16

83%

7.4%

71%

40%
Less

60%

80%

100%

ARTHUR D. LITTLE

At the same time as they are adding to data

Almost three-quarters of GPs see advantages inmanagement and reporting requirements,

registering “green” funds. That viewpoint is closely

new rules, including the Sustainable Financeshared by a similar proportion of LPs who see more

Disclosure Regulation, are seen as creating

funds going “greener,” highlighting a very clear

opportunities for the PE industry to focus on

shift to more sustainable investment and greaterand deliver climate and ESG results (see Figure 14).

ESG focus across the industry (see Figure 15).

Figure 14. Advantages seen in registering

Figure 15. Increased expectations on funds

Figure 14. Advantages seen in registering
Figure 15.
asIncreased“green” fundexpectations on funds go
due to regulatory developments
as “green” fundgoing “greener” due to regulatory developments

GP
Yes

No

LP
72.0%

28.0%

Yes

75.0%

No
N/A

21.0%
4%

Source: Arthur D. Little, Invest Europe
Source: Arthur D. Little, Invest Europe

Source: Arthur D. Little, Invest Europe

Source: Arthur D. Little, Invest Europe

17

R E P O R T — T H E I N S I G H T: K E E P I N G A N E Y E O N T H E H O R I Z O N

6 . D I G I TA L I Z AT I O N R E M A I N S L E A D
O P E R AT I O N A L I N I T I AT I V E F O R G P s

The operational focus of PE firms on improving“At most of our portfolio companies, we have run

portfolio companies is relatively little changed— or are running — initiatives to increase digitalin the cooling economic climate. Digitalization

maturity, while also using digital processes toremains the leading operational lever for change

become more cost-efficient.”

at companies, selected by over two-thirds

George Swirski, Co-Founder & Chairman,of GPs, followed by acquisitions and organic

Abrisgrowth (see Figure 16).
Actions to improve sustainability have become
more important, reflecting earlier responses
highlighting greater attention to ESG. Costreduction measures have also increased inimportance for GPs, highlighting the need tocontrol high inflation and higher input costs,
including energy. Geographic expansion has also
become more important as GPs look to diversify

theirMost
portfolio
companies’ improvement
products and services
Figure 16.
importantinitiatives being run inintoabroaderrange
ofmarkets.
portfolio companies at the moment*
Figure 16. Most important improvement initiatives being run in portfolio companies at the moment*
2022

GP

2021

GP

Digitalization

Digitalization

68.6%

Acquisition-led growth
Organic growth
Sustainability

72.0%

60.5%

Acquisition-led growth

65.3%

59.7%

Organic growth

63.6%

52.4%

Sustainability

Cost reduction

49.2%

Cost reduction

32.2%

Geographic expansion

48.4%

Geographic expansion

34.8%

Customer retention

24.2%

Liquidity financing

13.7%

Right sizing

8.9%
0%

20%

40%

60%

80%

100%

36.4%

Customer retention

17.8%

Liquidity financing

16.1%

Right sizing

12.7%
0%

20%

40%

60%

80%

100%

Note: * Multiple choice answers were available
Source: Arthur D. Little, Invest Europe

1618

ARTHUR D. LITTLE

CONCLUSION

European private equity continues to grow and

The short-term headwinds have not diminishedevolve, reacting to challenges and responding

the industry’s commitment to ESG; if anything,to opportunities. The macro headwinds thatthey have further enhanced it. There is ahave developed this year are inescapable —clear direction toward “greener” funds andrising inflation, geopolitical risk, higher interest

investments that take climate and ESG

rates, and the threat of recession — yet for agile

considerations even more firmly into account,managers, they highlight new routes to deploy

as the European PE industry adapts to some

capital and use various levers for operationalof the world’s most developed regulation on

improvements at companies.

sustainable investment and disclosure.

Private equity has weathered the first half

It is private equity’s ability to take the long-strongly with investment levels that, while down

term view that is at the heart of its relationshipon last year’s result, are notably higher than thewith investors. In the near term, technicalpreceding period. There is further uncertainty

considerations around LP allocations, as well asahead, but funds are preparing to embrace that,the ability to secure exits in uncertain market

partly by targeting more public-to-privatesconditions, will weigh on fundraising. But in theand corporate carve-out transactions. The

medium term, the industry’s track record on

conditions enhance other opportunities as well,

performance over decades, rather than months

such as the potential for more investment inand years, will sustain and help draw more

renewable energy or leveraging GPs’ operational

capital into the asset class. Private equity isexpertise to drive value through measuresan active and integrated part of the European

focused on sustainability and geographic

investment landscape, transforming businesses

expansion, as well as digitalization and bolt-on

and supporting investors not only in good times,

acquisition strategies.

but also when the outlook darkens.

19Arthur D. Little has been at the forefront of innovation since 1886. We are an acknowledged thought
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About Invest Europe
Invest Europe is the association representing Europe’s private equity, venture capital and infrastructure sectors,
as well as their investors. We have over 620 members, split roughly equally between private equity, venture
capital and limited partners — with some 100 associate members representing advisers to our ecosystem. Thosemembers are based in 57 countries, including 42 in Europe, and manage 70% of the European private equity andventure capital industry’s €846 billion of assets under management. Businesses with private capital investment
employ 9.9 million people across Europe, 4.3% of the region’s workforce.
For more information visit www.investeurope.eu@InvestEuropeEU
https://www.linkedin.com/company/invest-europe