M&A among private equity (PE) firms is expected to gain pace in 2018, as a positive economic outlook in EU countries is forecast to offset economic uncertainties such as Brexit – but the UK is the only EU country where growth is not predicted. Industries predicted to see the most PE M&A activity are pharma, business services & logistics, and technology, media & telecommunications (TMT). There is also rising interest from Chinese investors, who benefit from a large home market and access to favourable financing conditions, according to a survey of PE professionals from leading PE firms across Europe, conducted by Roland Berger.

Some of the survey's key findings include:

• A little more than half of the PE professionals (51%) surveyed expect a growing number of M&A transactions with PE involvement in 2018 – This is similar to the previous year.
• Among the most influential factors for M&A in 2018, PE professionals view the overall economic situation rather favourably, whereas they expect a deterioration in political stability. Uncertainty over Brexit negotiations and some secession movements may have contributed to this view.
• Geographically, growth in PE-driven M&A is expected across all regions, except for the UK. The most favourable outlook exists for France, followed by Spain & Portugal – Germany has a positive outlook, but slightly below prior-year level.
• Divesting existing investments is the focus of PE activity for 2018, followed by making new investments, which was the top focus in 2017 and 2016.
• Growth financing and financing for leveraged buyouts are expected to be more easily available in 2018 – The financing situation with regard to refinancing and recapitalization is not expected to change materially.
• Add-on acquisitions and digitalisation/Industry 4.0 are expected to be the most important portfolio improvement/value creation measures in 2018.

Roland Berger's Sascha Haghani points out that more than two-thirds of the PE professionals polled believe that the private equity business model is set to see a greater shift towards active portfolio management. He said: “PE firms that seek to add real value in their portfolio need to be actively involved in decisions taken within the companies themselves – and investors are well aware of that now.”