European M&A opportunities are abundant as 2024 comes to an end, with small and midcap companies across Europe finding themselves in a climate ripe for change. Investor interest remains strong, particularly in technology, energy, and sustainable sectors. Furthermore, recent global economic adjustments have also created strategic M&A opportunities.
The European economic landscape: A strengthening foundation
Europe’s macroeconomic outlook, while historically cautious, has evolved with central banks gradually easing interest rates, particularly in the Eurozone, the UK and Scandinavia. Indeed, this easing has narrowed bid-ask spreads, aligning buyers’ and sellers’ expectations (source: Pitchbook). As public markets rebound, as evidenced by the STOXX 600 Index reaching new highs, there is growing optimism that private markets will follow suit. Particularly, for small and mid-cap companies, a reinvigorated European market sets the stage for expansion, acquisition and divestment strategies, presenting Eurpoean M&A opportunities for growth and value creation.
Tech, sustainable energy and carve-outs: Sectors to watch
PitchBook’s data reveals a surge in European M&A activity, particularly in sectors such as technology, healthcare and industrials. In particular, carveouts have emerged as a significant trend, accounting for 18.2% of YTD deal value in 2024, a level not seen since 2019 (source: supra Pitchbook). Large corporates are increasingly shedding non-core or underperforming units. This creates opportunities for M&A players to acquire assets at potentially lower valuations. For example, Telecom Italia’s sale of its fixed-line network to KKR was a landmark deal, highlighting both market appetite and potential for carve-outs.
Meanwhile, the European technology and sustainable energy sectors continue to drive deal flow. With significant megadeals in IT and sustainable energy infrastructure, we see increasing value in energy transition technologies. The long-term growth potential in this sector remains robust, supported by European policies that support net-zero targets, further amplyfying the European M&A opportunities in these rapidly expanding markets.
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The influence of US capital and the global M&A context
Increased interest from North American investors reflects Europe’s rising profile as a fertile ground for private capital. According to recent data, US-based investors account for 49.5% of the year-on-year growth in European deals, demonstrating a significant infusion of foreign capital (source: Pitchbook). This cross-continental flow of capital is critical for small and mid-cap companies seeking investors aligned with their growth objectives. For M&A advisers, this trend underscores the need for nuanced positioning to attract both European and US investors. It involves leveraging Europe’s sectoral strengths while addressing transatlantic market concerns.
Globally, the M&A market is undergoing a recalibration. A look at economic signals tells a story of rising yields and bullish trends in assets such as gold and bitcoin, that suggest markets are preparing to hedge against inflation amid anticipated economic pressures. As Treasury yields rise and investors consider diversifying into commodities and select technology stocks, small and mid-cap companies may find a competitive advantage. They can achieve this by focusing on sectors that prioritize growth and resilience.
Strategic outlook for small and midcap M&A players: Tapping into Eurpoean M&A Opportunities
For small and midcap companies, this economic climate offers several strategic opportunities:
1. Expand through acquisitions: With plenty of dry powder available among private equity firms, European small and midcap companies can seek acquisitions in sectors with high growth potential. Sustainable energy and technology carve-outs are well positioned to benefit from continued investor interest.
2. Leverage foreign capital: The surge in US capital signals favourable conditions for companies able to attract transatlantic interest. However, the key is to emphasise unique European growth stories, particularly in renewables and niche technologies.
3. Prepare for a competitive exit market: While exits have been sparse, sponsor acquisitions are driving a larger share of exit activity (source: supra Pitchbook). Companies need to be exit-ready by strengthening fundamentals and positioning assets to stand out under heightened scrutiny.
Seizing European M&A Opportunities for Strategic Growth
As Europe’s private market dynamics evolve, M&A strategies for small and mid-cap companies should adapt. This will help them take advantage of the dual forces of economic stabilisation and sector demand.
Moreover, embracing these opportunities and strategically aligning with local and international capital trends will allow companies to thrive in the coming quarters.
The outlook for 2025 is promising, as we see an era of dynamic growth ahead for M&A.
About the author
Jeroen Maudens is an experienced global M&A advisor ONEtoONE Corporate Finance with extensive experience in cross border transactions. He specialises in identifying strategic investment opportunities and guiding companies through complex transactions. Jeroen is also a mentor for the Founder Institute, supporting emerging tech entrepreneurs.
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