Acquisitions, IPOs… European venture capital funds are experiencing concern. The downturn can be attributed to a number of factors, including a lack of fund outflows, a reduction in fundraising activity and a virtual absence of new IPOs. Here are some explanations and analyses from the experts at AURIS Finance, a consultancy specialising in mergers and acquisitions.
What are the primary concerns of venture capital (VC) funds in the current business environment? A recent survey conducted by the European Investment Fund (EIF) and the Invest Europe association revealed that 50% of venture capitalists are currently concerned about exits. Venture capital and private equity funds are experiencing difficulties in divesting their positions. Following the euphoric post-Covid period and against a backdrop of low interest rates, investors were investing heavily in innovative companies. Not all of the investments have yielded the anticipated results, and with financing becoming increasingly scarce, funds are encountering difficulties in divesting their assets. Among other sources of concern, 35% of VCs cite insufficient fundraising and 32% cite the increasing scarcity of institutional investors.
M&A transactions are on the decline
The current climate in the European tech sector is characterised by a prevailing sense of gloom. A study by the investment bank Avolta Partners revealed that merger and acquisition transactions in France were halved in the first half of 2024. While the sums involved remain considerable, the number of transactions is on the decline. In the first half of 2024, 128 French tech companies exited the market, while the total value of mergers and acquisitions and initial public offerings (IPOs) reached €5 billion. A number of significant acquisitions have contributed to an overall increase in the value of French Tech buyouts. One notable example is LumApps, a leading provider of corporate intranet solutions, which was acquired by the British fund Bridgepoint for $650 million. Similarly, IPOs have become less frequent since 2022. Only a handful of major deals have made the headlines. Notable IPOs include that of software publisher Planisware, which was completed at the end of 2023 and valued at €1.1 billion.
Will 2025 bring an upturn?
In light of these developments, it appears that Europe is shifting towards a greater prevalence of more mature companies with higher valuations. However, in terms of venture capital investment, Europe is currently lagging significantly behind the United States. Over the past decade, venture capital investment in Europe has averaged just 0.3% of GDP, less than a third of the US average. Nevertheless, the majority of investors are optimistic about the year ahead. 59% of the VCs surveyed believe that the situation should improve slightly or significantly by 2025. A mere 6% of respondents currently hold a pessimistic outlook, anticipating further deterioration in the near term. This optimism is supported by a number of factors: There has been a notable increase in Series B fundraising activity, while key interest rates have also seen a decline. In addition, start-ups are becoming more sophisticated when it comes to cash management.
Our experts at your service
In the current uncertain macroeconomic climate, it is more important than ever for company directors to seek expert advice. AURIS Finance‘s specialists can assist you in making the optimal decision between selling and refinancing. Their sector-specific expertise enables them to identify potential buyers who are familiar with the specific features of your business. From identifying potential investors to closing the deal, including due diligence, AURIS Finance will be at your side throughout the process.
