During the last fifteen years, European private capital has evolved into a multi-strategy industry playing an influential role in shaping European M&A activity.
The European private capital sector has undergone a period of transformative growth during the last decade, with the combination of strong capital inflows from investors eager to increase exposure to private assets and the emergence of new investment strategies, including private debt, infrastructure—both traditional and digital—and real estate, supporting the expansion of private capital assets under management. The growing presence of sovereign wealth funds (SWFs) in the industry has also boosted private capital’s scale and reach.
European private equity assets under management have more than doubled since 2015, to reach a total of €1.3 trillion in 2024, while European private debt assets under management have grown at a compound annual growth rate of more than 20 percent for the last ten years, reaching US$656.3 billion in 2024. Private infrastructure assets, meanwhile, have reached an all-time high of US$1.3 trillion, according to Boston Consulting Group, growing by 8 percent year on year in 2024, despite a challenging macroeconomic backdrop. Cash-rich SWFs and public pension funds from across the globe have become increasingly active in European M&A and co-investment deals, bringing vast sums of capital into play.
As the region’s private capital industry has expanded, so has its influence over the key trends shaping European M&A activity, and the asset class is set to play a central role in the continent’s deal revival.
An integral part of Europe’s M&A market
Private capital is now firmly established as a crucial source of debt and equity for European deals spanning a range of deal scenarios, from buyouts and venture funding rounds to debt financing transactions.
The asset class is not immune to market volatility and dips in the M&A market, but has developed the capacity to sustain deployment levels across cycles and expand its footprint across European M&A over time.
European PE buyout deal value, for example, almost doubled during the last decade, from US$134 billion in 2014 to US$251 billion in 2024, with PE dealmakers successfully navigating market disruptions such as Brexit, the pandemic and rising interest rates.
Even though private equity activity has slowed in the last three years, PE now regularly accounts for around a third of annual European M&A activity, with managers consistently securing sizeable, standout deals across all points of the cycle.
Deal highlights in 2025 include CVC’s acquisition of a 50 percent stake in urban wellness resort developer Therme Group to launch the €1 billion (US$1.2 billion) Therme Horizon joint venture, and EQT selling its portfolio company Karo Healthcare, a consumer health platform, to KKR.
Innovative structures
These transactions illustrate how PE players have adapted deal targeting and structures to keep deal flow going, with managers now well versed in executing co-investment deals and take-privates.
Co-investment involves private equity GPs offering institutional investors the opportunity to make direct equity investments in transactions. According to a StepStone survey of 145 GPs managing 420 funds, co-investment deal volume has increased 30 percent since the pandemic. For GPs dealing with higher debt servicing costs and lower leverage, co-investment has filled the debt gap in capital structures, as well as spread risk.
Institutional investors, including SWFs and public pension funds, have shown strong appetite for these deals, which provide more control over their investments, as well as lower management fees and carried interest costs.
The growth in co-investment has seen SWFs and public pension funds playing an increasingly important role in the deal landscape. According to Boston Consulting Group, these entities manage more than US$36 trillion in assets and have expanded their private markets allocations at an average of 10 percent a year over the last ten years.
Co-investing and direct investing have been two of the main drivers of private markets allocations growth for SWFs and public pension funds, which are building out from their extensive PE fund allocation programs to become more active in these other investment pathways.
At the time of writing (September 18), SWFs alone had participated in 29 European M&A transactions worth US$13.9 billion this year, in sectors ranging from healthcare, chemicals and finance to tourism, telecom and luxury retail. SWF involvement in deals is already ahead of full-year totals for 2023 and 2024, putting sovereign wealth activity on track to post one of the strongest years since the 2021 M&A boom.
These deals will usually be done alongside sponsors and other institutions, with SWFs typically seeking out large deals in resilient sectors where they can take up sizeable minority stakes valued in the US$500 million-US$1 billion range.
PE firms have seized the opportunity to join forces with these deep-pocketed entities to extend the overall reach of private capital in European M&A.
With secondary prices becoming inflated and public markets undervaluing companies, PE-backed take-privates have also increased significantly, meaning that buyout firms are getting better deals on public-to-private transactions than on purchases from PE peers. According to figures from HSBC and UK think tank New Financial, private equity firms have executed 1,013 take-privates of European-listed companies, together valued at more than US$1 trillion, in the last decade.
PE firms have been adept at identifying solid assets that are undervalued on public markets and taking advantage of stock market volatility to bid for listed companies at attractive entry valuations.
The high volume of take-private activity led by PE sponsors demonstrates how managers have broadened their deal playbooks. Once typically focused on sourcing deals involving owner-managed companies, secondary buyouts and corporate carve-outs, PE’s interest in new areas highlights the growing influence of private capital as a provider of equity alongside public markets.
Moving into infrastructure
Private capital has also expanded its playbook to become an active force in infrastructure.
Moving into this space has enabled private capital firms to offer investors stable returns by investing in infrastructure assets with predictable, long-term contracted returns.
Hamilton Lane analysis shows infrastructure as one of the most consistent private capital strategies, outperforming public-market equivalents for more than a decade and consistently delivering internal rates of return in the low teens.
The sector also presents a long growth runway, with the G20 Global Infrastructure Hub forecasting that investment in infrastructure will have to ramp up by 2040 to meet surging demand. Private capital will have a key role to play in helping to fill an anticipated US$15 trillion infrastructure funding gap over the next 15 years.
In addition to steady, risk-adjusted returns the sector also presents growth opportunities for infrastructure players in new emerging verticals such as data centers.
Goldman Sachs forecasts power demand from data centers will increase by 50 percent by 2027 and 165 percent by 2030, from 2023 levels, and the private capital sector is already playing a key role alongside Big Tech to finance the data center boom.
According to Morgan Stanley models, investment in data centers will reach US$2.9 trillion by 2029. The big hyperscalers, which provide cloud-computing infrastructure to businesses and consumers on a huge scale, will finance just under half of this investment directly, with private capital firms filling the funding gap. Around US$800 billion of data center investment will flow from private credit asset-based financing and debt, and US$350 billion is forecasted to come from private equity venture capital and SWFs.
The data center boom will also unlock additional investment opportunities in other infrastructure verticals, with significant investment anticipated in upscaling power grids and electricity supply data centers, as well as other utilities that data centers need to function.
Credit where it’s due: The rise of private credit
Private capital has also expanded its sphere of influence beyond equity financing and into private debt.
The private debt market came into its own in the aftermath of the global financial crisis, with a cohort of private credit managers emerging in Europe to fill a gap in mid-market acquisition financing left by clearing banks, which withdrew from the market to rebuild balance sheets and meet new capital adequacy requirements.
The market has gone from strength to strength since then, with managers delivering exceptional risk-adjusted returns for investors and providing borrowers with flexible debt capital structures, as well as lower deal execution risk than broadly syndicated loan (BSL) markets.
Private debt’s solid performance has supported resilient fundraising, with the US$146.9 billion recorded in H1 2025 up on last year and comparable to the peak levels observed in 2021, according to Private Debt Investor figures.
Deal volume in direct lending, the single-largest private debt category, has proven equally robust, and deal value in Europe reached a record high of €36.7 billion (US$43 billion) in Q2 2025—well above the average quarterly deal value of €23.5 billion (US$27.6 billion) across the prior four quarters, according to Debtwire.
Direct lending numbers received a boost from the big-ticket €6.5 billion (US$7.6 billion) refinancing of online classifieds business Adevinta, believed to be the largest-ever European direct lending deal. A 17 percent quarter-on-quarter increase in direct lending deal volume has also helped to increase issuance.
As volumes and issuance have grown, direct lenders and private debt players have been able to finance larger tickets and provide a viable alternative to BSL markets for borrowers seeking large debt volumes.
A European Central Bank review of private markets noted that median euro private credit deals in the euro area increased from €75 million (US$88 million) in 2021 to €168 million (US$197 million) in 2023, according to Pitchbook data. The ability of private debt funds to underwrite larger tickets that would normally default to BSL has provided a consistent source of funding for borrowers, who are now able to secure finance even when debt capital market windows close during periods of macro volatility.
Private debt players, however, are also working in collaboration with BSL underwriting banks to curate debt structures that combine financing tranches from both BSL and private debt markets. Several banks and debt funds have formalized these partnerships, with banks sharing loans with private debt players to spread risk and comply with capital ratio regulation.
Noting the growth and demand for private debt, several PE players have taken the opportunity to launch their own private debt strategies. This provides their investors with a wider range of investment options and a “one-stop shop” where investors can access a variety of strategies. It also offers a diversity of risk-reward dynamics through a single-manager relationship.
PE’s expansion into private debt, and the growth of private debt as an asset class in its own right, has opened yet another channel for private capital to flow into European M&A markets and drive deal activity.
Outlook: Private capital to spur M&A in Europe
Following an extended period of elevated inflation and rising interest rates, European dealmakers are cautiously optimistic that an even stronger recovery in M&A activity is on the cards.
If the bounce-back does gather momentum, private capital will be an essential component of the rebound, with dealmakers and companies likely to rely on private capital, whether for debt or equity.
Private capital dealmakers have proven adept at refining investment structures and investment strategies to meet company capital requirements and have positioned alternative assets as a cornerstone of the mainstream European M&A ecosystem.
