Europe-Focused Private Equity Struggles With Exit Slowdown Despite Strong Capital Inflows

According to S&P Global Market Intelligence, the number of active and closed Europe-focused funds dropped for the third consecutive year in 2024, falling to just 386 from 456 in 2023. This marks the lowest number of funds since 2019 and reflects growing caution among firms navigating a difficult fundraising and liquidity environment.

Despite the drop in fund count, capital raised remained surprisingly strong. In 2024, PE funds targeting Europe raised $187.36 billion—down slightly from the $199.48 billion recorded in 2023—but still the second-highest annual total in over a decade. The fundraising strength was largely driven by a “flight to quality,” with investors focusing their capital on large, well-established funds. Thirty-one vehicles closed with at least $1 billion in commitments, accounting for 66% of all capital raised. EQT’s $23.95 billion EQT X fund and Cinven’s $14.44 billion Eighth Cinven Fund were the year’s standout closings.

However, the broader market context remains challenging. Liquidity is a key concern, with private equity exits hitting a five-year low globally in 2024. The mismatch between seller price expectations and buyer willingness has led to fewer successful sales, longer hold periods, and restrained capital recycling. As Christiaan de Lint of Headway Capital Partners noted, “The lack of distributions made dedicated programs less capable to make follow-on investments or re-ups in their existing managers.”

Fund managers have become more cautious as they juggle growing investor expectations with limited exit avenues. “Until they've had exits—whether through sales, IPOs, or recapitalizations—it will be challenging for managers to deliver returns to their investors,” said Michael Henningsen of Raymond James Private Capital Advisory.

The European market is also contending with another complex issue: the sheer size of some portfolio companies. According to bankers, some firms are hesitant to acquire large businesses for fear that they may prove too big to exit later. This has led to a trend where private equity sponsors are considering divesting divisions or reducing ownership stakes to facilitate eventual exits. As Stephen Pick of Barclays noted, “There is concern that some assets are just simply too big.”

While M&A activity is ongoing, the resale of companies from one private equity sponsor to another has become more difficult, often due to saturated value-creation opportunities. Auctions are drawing fewer bidders and processes are dragging out. IPOs have emerged as a partial solution, especially for large portfolio companies with few other exit options. Though only 9% of exits in 2024 came through public markets, there are signs that equity capital markets are slowly reopening.

Looking ahead to 2025, Europe’s private equity sector is likely to remain under pressure. Yet, opportunities may emerge from Europe’s significant infrastructure and defense spending plans, particularly in Germany. Combined with lower and more rational valuations compared to the U.S., this could provide a foundation for selective recovery. However, unless exit conditions improve meaningfully, many fund managers may continue to operate in a holding pattern.