《理特咨詢：2024年歐洲私募股權行業洞察報告：AI崛起下的新機遇（第五版）（英文版）（24頁）.pdf》由會員分享，可在線閱讀，更多相關《理特咨詢：2024年歐洲私募股權行業洞察報告：AI崛起下的新機遇（第五版）（英文版）（24頁）.pdf（24頁珍藏版）》請在三個皮匠報告上搜索。

1、Green shoots visible as AI rises rapidly 5th editionI N PA R T N E R S H I P W I T H:THE INSIGHT:STATE OF THE EUROPE AN PRIVATE EQUIT Y INDUSTRY2024CONTENTINTRODUCTION 31.FUNDRAISING REMAINS WEAK,ALTHOUGH EXPECTATIONS IMPROVE 62.AS INVESTMENT PRESSURES PERSIST,SENTIMENT TURNS MORE POSITIVE 103.AI&DE

2、FENSE MOVE UP GP TARGET LISTS,RENEWABLES DROP DOWN 124.DIVESTMENT ROUTES CHANGING AS EXIT ACTIVITY&CONFIDENCE INCREASE 145.EXITS BECOME THE PRIORITY FOR PE,AI DOMINATES NEW WORKING PRACTICES 166.SUSTAINABILITY REGULATION HAS SIGNIFICANT IMPACT ON FUNDS&REQUIRES RESOURCES 20CONCLUSION 23ARTHUR D.LITT

3、LEJONAS FAGERLUND Partner,Sweden GUILLAUME PICQPartner,France INVEST EUROPEJULIEN KRANTZResearch Director julien.krantzinvesteurope.euGeneral disclaimerADLs conclusions are the results of the exercise of its best professional judgment,based in part upon materials and information provided to ADL by I

4、nvest Europe,secondary research,and expert interviews conducted by ADL.Use of this Report by any third party for whatever purpose should not,and does not,absolve such third party from using due diligence in verifying the Reports contents.Any use that a third party makes of this document,or any relia

5、nce on it,or decisions to be made based on it,are the responsibility of such third party.Neither ADL nor Invest Europe accepts any duty of care or liability of any kind whatsoever to any third party,and/or any responsibility for damages,if any,suffered by any third party as a result of decisions mad

6、e,or not made,or actions taken,or not taken,based on this document.2The appetite to look outward at new opportunities points to the private equity(PE)industry expecting a brighter near-term future.Invest Europes H1 2024 data shows that fundraising,investment,and exit activity have been challenging.H

7、owever,divestments are showing signs of picking up,which could unlock fundraising and investment,reviving the virtuous PE cycle again.Furthermore,both general partners(GPs)and limited partners(LPs)of PE firms are predicting higher levels of activity in the next 12 months supported by LPs demands for

8、 distributions and GPs record levels of dry powder as interest rates fall and the broader macroeconomic climate becomes more predictable.Risks and opportunities presented by environmental,social,and governance(ESG)were previously prominent in partners minds and shaped the direction of GP initiatives

9、,funds,and investments.Today,the focus is clearly on AI and all the ways it can impact the industry both positively and negatively.The fact that AI rose so rapidly up the agenda in terms of GP investment focus,internal priorities,and due diligence requirements is testament to managers reaction speed

10、.Many are looking to participate in investment opportunities as AI leaders emerge in Europe.A large number are exploring the potential to integrate AI at portfolio companies,seeking new value-creation levers and productivity drivers.Others are turning the technology on their own operations,such as d

11、eal origination and analysis,looking for differentiation and an edge in competitive markets.And most are extending their due diligence to cover AI,analyzing the opportunities and the risks it may mean for companies and markets.INTRODUC TIONARTHUR D.LITTLE3Of course,ESG hasnt completely fallen out of

12、 favor.Attention to ESG issues and compliance with sustainability-related regulations remain top priorities for both GPs and LPs.In parallel,adopting ESG best practices and securing ESG expertise(either in-house or external)are increasingly the norm.As such,it is less a future priority than just a f

13、ew years ago.There are ever-present risks,including conflict and geopolitical tensions.The threat of cyberattack is considerable,particularly in industries embracing digitalization.And new and evolving regulation places a sizeable burden on PE and VC firms.The takeaway from this years survey should

14、be one of green shoots.After two challenging years,capping a rollercoaster period from the onset of the pandemic,PE and VC firms and their investors are looking at 2025 with increasing optimism,ready to move forward and capture new opportunities.“AI has moved up as a hot topic among both PE firms an

15、d their investors.It can help portfolio companies to find operational efficiency opportunities,but it is important to ensure a proper and safe adoption of AI and implement policies around it.We are also applying AI in our own firm to help inform decisions and improve back-end processes.”Henrik Johan

16、sson,General Counsel,Nordic Capital Advisors“ESG is still an important topic for us,but as most firms are up to speed on it,there are other areas now that are relatively more important.”Michel Galeazzi,cofounder and Partner,Evoco AG 4REPORT:THE INSIGHT:STATE OF THE EUROPEAN PRIVATE EQUIT Y INDUSTRYA

17、RTHUR D.LITTLE5Figure 1.Funds raised by European PE and VC funds1.FUNDR AISING REMAINS WE AK,ALTHOUGH E XPEC TATIONS IMPROVEPE fundraising was challenging in the first half of 2024.Although the volume of capital raised increased by 15%year-on-year to 59 billion,it was 28%below the amount raised in t

18、he second half of 2023.The reality of the European market is that fundraising is uneven,cyclical,and increasingly polarized between mega-funds and small country-or sector-focused funds.This can lead to sizeable swings from year to year and half to half.The year-on-year increase was almost entirely d

19、riven by a sharp improvement in fundraising in the Nordics,as capital raised in the region more than tripled to 10 billion.Across other regions,fundraising was largely in line with the first half of 2023.When looking at amounts compared to the previous half,the decline was almost entirely due to a f

20、all in fundraising for funds based in the UK and Ireland(see Figure 1).The UK remains the European hub for many large PE managers and thus the biggest region for fundraising,but it is also more volatile.Meanwhile,France and Benelux,as the second-largest region,perform more consistently due to a wide

21、r spread of medium-sized funds across constituent countries.After a challenging period,the improving macro backdrop is causing a modest but noticeable boost in fundraising expectation.As shown in Figure 2,27%of GPs expect fundraising to increase over the next 12 months versus the last 12 months,comp

22、ared with 20%last year and just 6%the prior year.Source:Arthur D.Little,Invest EuropeSource:Arthur D.Little,Invest EuropeFigure 1.Funds raised by European PE and VC funds01020304050607080901003122355H1-204178220H2-2042222433H1-2110184417H2-2172414350H1-2251322549H2-226163422H1-2320(bn)347H2-23816104

23、2110765187549995518259H1-24CEEDACHFrance&BeneluxNordicsSouthern EuropeUK&IrelandFigure 2.GPs and LPs expectations on forward-looking fundraising over timeSource:Arthur D.Little,Invest EuropeSource:Arthur D.Little,Invest EuropeFigure 2.GPs and LPs expectations on forward-looking fundraising over time

24、21%19%26%70%70%64%9%11%10%LessNo changeMore2023LPLPLP202227%20%56%30%22%17%50%72%6%LessNo changeMoreGPGPGP2024GP fundraising(next 12 months vs.last 12 months)LP capital allocations to PE asset class(next 3 years)6REPORT:THE INSIGHT:STATE OF THE EUROPEAN PRIVATE EQUIT Y INDUSTRYARTHUR D.LITTLETHE UK

25、REMAINS THE EUROPEAN HUB FOR MANY LARGE PE MANAGERS AND THUS THE BIGGEST REGION FOR FUNDRAISINGMore notably,fewer than one in five(17%)expect less capital to flow into the asset class compared with half of those surveyed last year.Interestingly,while GP views have varied and improved,LP expectations

26、 of capital allocations have changed only modestly.Around a fifth expect an increase in allocations,over two-thirds expect no change,and less than 10%believe that capital committed to PE will fall.All figures are largely in line with the past two years and indicate a steady increase in the overall a

27、mount of capital flowing into PE.Ultimately,the vast majority of LPs continue to believe in the asset classs potential to deliver strong returns amid ongoing uncertainty.Opinions about the democratization potential of PE remain strong,although attention is focused on the wealthier brackets of indivi

28、duals.More than three-quarters of GPs see potential in raising capital from(ultra)high-net-worth clients,the smallest in number but the most sophisticated and most likely to have sizeable pools of capital to deploy(see Figure 3).Just under half see the potential of marketing funds to the“mass-afflue

29、nt”category:individuals with investible wealth ranging from 100K to 500K.The attraction of smaller retail clients remains muted,although not negligible,with just under one in five interested in the category.Investor appetite across all fund types remains consistent.Similar allocation levels are anti

30、cipated across secondaries,impact,buyouts,and credit,with around a fifth of respondents expecting to increase commitments to funds in those categories (see Figure 4).Although impact clearly remains an investment priority,the rush to commit to the segment appears to be cooling from last year,when 30%

31、of LPs expected to allocate more.Past performance and returns continue to be the most important differentiating factor for managers in a competitive fundraising environment,cited by three-quarters of GPs (see Figure 5).The funds investment strategy is seen as another important differentiator,increas

32、ing in importance from last year,reflecting the development of sub-themes within increasingly established segments,such as secondaries and credit,as well as refinements of strategies within large segments such as buyouts.Figure 3.Interest level to market future funds,irrespective of regulatory barri

33、ersNote:(1)Investors with typically more than 500K wealth;(2)investors with wealth ranging from 100K-500K;(3)investors with wealth below 100KSource:Arthur D.Little,Invest EuropeNote:(1)Investors with typically more than 500K wealth;(2)investors with wealth ranging from 100K-500K;(3)investors with we

34、alth below 100KSource:Arthur D.Little,Invest EuropeFigure 3.Interest level to market future funds,irrespective of regulatory barriers(Ultra)high-net-worth clients1“Mass-affluent”clients2Smaller retail clients3Not of interest77%85%70%47%51%37%17%17%16%16%11%22%2022202320247About a third of GPs see us

35、e of AI as a differentiator,as many embrace the technology at portfolio companies and within their own operations,even as others arguably lag with their adoption.One of the most notable changes is the sharp decline in the relative importance of ESG as a differentiating factor from three-quarters of

36、respondents last year to just under a third this year.This is not necessarily a sign that ESG initiatives have fallen out of favor,but rather that strong ESG credentials have increasingly become the norm,and that both GPs and LPs now face growing EU sustainability regulatory requirements.This trend

37、is a signpost to the future of AI,as its potential to make GPs stand out from the crowd increases before it ultimately becomes industry standard.BOTH GPs AND LPs NOW FACE GROWING EU SUSTAINABILITY REGULATORY REQUIREMENTSFigure 4.Expected changes in investment strategy allocations(next 12 months vs.l

38、ast 12 months)Source:Arthur D.Little,Invest EuropeSource:Arthur D.Little,Invest EuropeFigure 4.Expected changes in investment strategy allocations(next 12 months vs.last 12 months)LP21%21%20%19%14%15%13%69%68%76%72%72%77%77%87%87%10%11%9%14%9%11%11%13%Secondaries asset fundsImpact fundsBuyout fundsC

39、redit fundsVenture fundsInfrastructure fundsGrowth funds2%Distressed asset fundsReal estate funds4%HigherSameLowerFigure 5.Most important factors for PE firm differentiation within market in next two to three years Source:Arthur D.Little,Invest EuropeSource:Arthur D.Little,Invest EuropeFigure 5.Most

40、 important factors for PE firm differentiation within market in next two to three years Past performance/returnInvestment strategyPartner team experienceUsage of AIApproach to ESGDiversity,firms values&inclusionOther75%69%72%67%51%70%52%47%47%34%31%74%51%12%15%19%1%7%7%New response option 2024202220

41、2320248REPORT:THE INSIGHT:STATE OF THE EUROPEAN PRIVATE EQUIT Y INDUSTRYARTHUR D.LITTLE92.AS INVESTMENT PRESSURES PERSIST,SENTIMENT TURNS MORE P OSITIVEEuropean PE investments continued to decline in the first half of 2024,down 5 billion(11%)to 40 billion compared with the second half of 2023(see Fi

42、gure 6).Growth investments continued to fall,while the rate of decline in buyouts softened more modestly,potentially pointing to a bottoming of deal activity,as the reduction in interest rates amid cooling inflation begins to provide greater certainty and availability of financing.Already turning a

43、corner,VC investment picked up by 28%(2 billion)fueled in part by investments in fields such as AI and deep tech.Across segments,the number of deals declined.However,the average deal size is increasing slightly,indicating that GPs may focus more on larger transactions as they look to deploy their re

44、serves of dry powder into more stable opportunities to compensate for higher risks.Overall capital under management and dry powder grew by 15%and 18%,respectively,in 2023,demonstrating the step-up in scale and reach of Europes PE industry(see Figure 7).Dry powder totaled 410 billion at the end of 20

45、23.That equates to three to four years of investment capacity,slightly ahead of prior norms.However,as we saw during the immediate recovery from the pandemic,dealmaking can step up quickly and significantly across the board,including for mega-buyouts that can move the needle for overall investment t

46、otals.Figure 6.Investments by type in value and volumeNote:LS=left scale;RS=right scaleSource:Arthur D.Little,Invest EuropeNote:LS=left scale;RS=right scaleSource:Arthur D.Little,Invest EuropeFigure 6.Investments by type in value and volume01,0002,0003,0004,0005,00001020304050607080907316H1-209315H2

47、-20195011H1-21173910H2-21174910H1-2214367H2-22(bn)10376H1-2311256(No.of companies)8238H1-2444H2-238366775755454047Venture(RS)Growth(RS)Buyout(RS)Other(LS)Growth(LS)Buyout(LS)Venture(LS)-11%1 0REPORT:THE INSIGHT:STATE OF THE EUROPEAN PRIVATE EQUIT Y INDUSTRYARTHUR D.LITTLESecondary buyouts are antici

48、pated to be a major source of new deal flow in the coming 12 months,with more than two-thirds of respondents expecting activity to pick up(see Figure 8).Given increased LP pressure on incumbent PE owners to dispose of assets and return capital,the expected pickup is not surprising.However,seller pri

49、ce(and return)expectations,as well as the return of other potential routes to liquidity,including dividend recapitalizations,may reduce the actual deal flow potential.DEALMAKING CAN STEP UP QUICKLY AND SIGNIFICANTLY ACROSS THE BOARDPrimary transactions,spinoffs,and public-to-private deals are also e

50、xpected to offer the same or better investment potential as the past year.Figure 7.Capital under management and dry powder in Europe,end of 2023 Note:(1)CUM is defined as total amount of funds managed by fund managers valued at cost(as opposed to asset under management AUM,which refers to total mark

51、et value of all financial assets managed by PE firm);(2)dry powder is defined as the amount of funds(valued at cost)not yet invested and available for future investments Source:Arthur D.Little,Invest EuropeNote:(1)CUM is defined as total amount of funds managed by fund managers valued at cost(as opp

52、osed to asset under management AUM,which refers to total market value of all financial assets managed by PE firm);(2)dry powder is defined as the amount of funds(valued at cost)not yet invested and available for future investments Source:Arthur D.Little,Invest EuropeFigure 7.Capital under management

53、 and dry powder in Europe,end of 2023 125 58(46%)Capital under management(CUM)Dry powder(DP)272 89(33%)595 203(34%)NordicsUK&IrelandCEESouthern EuropeFrance&BeneluxDACH 12 4(31%)97 36(37%)54 21(38%)CUM1:1,154 bn 15%increase vs.2023DP2410 bn 18%increase vs.2023EUROPEFigure 8.Expected changes in PE tr

54、ansaction market(next 12 months vs.last 12 months)Source:Arthur D.Little,Invest EuropeSource:Arthur D.Little,Invest EuropeFigure 8.Expected changes in PE transaction market(next 12 months vs.last 12 months)26%68%Secondary market47%48%Primary market64%30%Corporate spinoffs61%25%Public-to-private deal

55、s68%6%State-owned(privatizations)MoreSameLessGP6%5%6%14%26%1 13.AI&DEFENSE MOVE UP GP TARGE T LIST S,RENE WABLES DROP DOWNAdvances in technology and the uncertain geopolitical landscape are exerting influence on the sectors that GPs view as most attractive.Deep tech and AI has moved up and now leads

56、 the list of target sectors,favored by more than two-thirds of GPs(see Figure 9).It is closely followed by defense(a new entry),as ongoing international conflicts and geopolitical tensions drive government spending in the sector,with a particular focus on technologies that can serve both civilian an

57、d military applications.Life sciences and other health or medical investments remain in focus but are less important as the legacy of COVID-19 diminishes.Deep tech/AI and business services have both gained more attention over the past two years.This is likely a reflection of a growing demand for tec

58、hnology and services that can boost productivity and efficiency,as well as GPs focus on emerging technologies that may deliver strong growth and high returns.It is also notable that the renewables sector has dropped out of the top five.At the other end of the spectrum,industrial and manufacturing in

59、dustries,as well as those tied to squeezed consumer spending,remain relatively low on GP investment-priority lists.Only a small number of managers see greater investment in any sector in the bottom five,in most cases well behind the proportion that anticipate less investment.Roughly half of GPs envi

60、sage less investment in the automotive sector,and around a third expect less investment in consumer goods and retail,a much higher proportion than the 14%who see more activity in the space(see Figure 10).Transportation is a new entry into the bottom five,so its not a surprise that only 13%expect inc

61、reased investment,although over three-quarters expect the same levels of deployment as last year and only about one in 10 expect a decrease.Figure 9.Expected investment activity levels in 2024 top five sectors compared to last 12 monthsSource:Arthur D.Little,Invest EuropeSource:Arthur D.Little,Inves

62、t EuropeFigure 9.Expected investment activity levels in 2024 top five sectors compared to last 12 months202420222023GP49%32%58%32%40%54%48%46%10%6%6%20%43%41%50%40%42%56%49%55%15%4%1%6%68%62%54%54%44%31%30%43%41%46%1%9%4%5%11%HigherSameLowerDeep tech&AIDefenseBusiness servicesLife science&healthcare

63、Biotech/medtechN/AN/ANew response option 20241 2REPORT:THE INSIGHT:STATE OF THE EUROPEAN PRIVATE EQUIT Y INDUSTRYARTHUR D.LITTLEAlthough the largest proportion of GPs and LPs still express no change in willingness to invest in defense or military investments,there is a clear,steady shift in sentimen

64、t.This is most likely driven by an escalation of international conflicts and increased geopolitical tensions,most notably within Europes neighborhood(see Figure 11).About a quarter of GPs and LPs have seen increased willingness to invest in technology that has both military and civilian applications

65、,up from about a tenth two years ago.However,challenges remain.The defense industry is often opaque due to national security concerns.Additionally,many defense projects do not align with ESG criteria,which are important to investors and can negatively influence investment decisions.There has been a

66、marked increase in acceptance of investment in military-only goods and technologies.This is particularly notable among LPs,with one in five now seeing increased willingness to back military-only investments,a three-fold increase over last year.This demonstrates how investor approaches to ESG have ev

67、olved and how the narrative around defense has shifted from one of aggression to one of protection.Figure 11.Change in willingness to consider investments in military-or defense-related sectorsSource:Arthur D.Little,Invest EuropeFigure 10.Expected investment activity in 2024 bottom five sectors comp

68、ared to last 12 monthsSource:Arthur D.Little,Invest EuropeSource:Arthur D.Little,Invest EuropeFigure 10.Expected investment activity in 2024 bottom five sectors compared to last 12 months36%11%62%12%69%9%38%5%26%22%57%53%14%26%50%61%70%48%36%13%23%42%8%10%14%14%54%67%76%67%45%32%19%26%48%11%13%7%7%H

69、igherSameLowerConsumer goods&retailIndustrial equipmentTransportationChemicalsAutomotiveN/AN/A202420222023GPNew response option 2024Source:Arthur D.Little,Invest EuropeFigure 11.Change in willingness to consider investments in military-or defense-related sectorsGP24%10%57%8%26%19%49%Yes,but only int

70、o dual-use goods&technologies(civilian&military)Yes,into goods&technologiesspecifically for military useNo,willingness is thesame as before6%No,willingness islower than before17%67%18%69%5%6%11%8%202220242023LP74%72%10%13%2%7%14%8%1 34.DIVESTMENT ROUTES CHANGING AS E XIT AC TIVIT Y&CONFIDENCE INCRE

71、ASEDivestment activity in the first half of 2024 highlighted some green shoots returning to the market,as well as ongoing challenges.Divestments(at cost)recovered by 6%to 14 billion from the second half of 2023,although exits declined by 22%(see Figure 12).Most likely,larger companies are achieving

72、exits,due to trend toward larger but fewer PE investments.Markets are signaling that exits are highly dependent on valuations,and valuations are highly dependent on asset quality.In other words,improving market conditions are enabling PE firms to exit investments that have performed strongly through

73、 the period of high inflation and interest rates.However,many exit processes continue to be interrupted or delayed by market volatility,with managers opting to hold assets for longer until markets recover more broadly.Expectations around exits appear to be improving,driven in part by improving confi

74、dence and reopening markets,as well as the ever-pressing need to return capital to LPs.Auctions are expected to increase,with 40%of GPs seeing better exit potential via intermediated processes to PE peers and cash-rich strategics(see Figure 13).More notable is the expected recovery of IPOs following

75、 some positive results for new European listings in the first half of 2024.Almost three in 10 GPs expect more IPOs,compared with three in 100 just two years ago.Figure 12.Divestments by type in value(at cost)and volumeNote:LS=Left scale;RS=Right scaleSource:Arthur D.Little,Invest EuropeNote:LS=Left

76、scale;RS=Right scaleSource:Arthur D.Little,Invest EuropeFigure 12.Divestments by type in value(at cost)and volume01002003004005006007008009001,0000510152025139H1-20138H2-201417H1-212416H2-212513H1-221411H2-221313H1-231310H2-23(bn)139H1-24(No.of companies)142423201617131413+6%Other(RS)Venture(RS)Grow

77、th(RS)Buyout(RS)Other(LS)Venture(LS)Growth(LS)Buyout(LS)Figure 13.Expected changes of exit route for companies under ownership(next 12 months vs.last 12 months)Source:Arthur D.Little,Invest EuropeSource:Arthur D.Little,Invest EuropeFigure 13.Expected changes of exit route for companies under ownersh

78、ip(next 12 months vs.last 12 months)202420222023GP40%36%29%22%52%52%39%68%32%AuctionsProprietary situationsIPOsManagement/owner buy-back8%11%10%MoreSameLess28%45%23%56%50%25%61%16%61%17%14%5%16%37%25%57%54%60%27%9%87%14%10%3%1 4REPORT:THE INSIGHT:STATE OF THE EUROPEAN PRIVATE EQUIT Y INDUSTRYARTHUR

79、D.LITTLEMANY EXIT PROCESSES CONTINUE TO BE INTERRUPTED OR DELAYED BY MARKET VOLATILITYWell over two-thirds of GPs and LPs anticipate more transactions over the 12 coming months compared with much lower expectations two years ago,when supply chain shocks,rising inflation,and interest rates were a lar

80、ger concern(see Figure 14).Similarly,though to a lesser extent,much higher numbers of GPs and LPs see increased valuation levels for assets as interest rates decline and financing availability improves.Valuations will also be driven by company performance and improving public market comparables,with

81、 the MSCI Europe benchmark up some 8%for 2024 by the end of the third quarter more than 30%from its mid-2022 lows.“We expect divestments to increase gradually over the next six to 12 months,as a large part of our invested funds are overdue or at the end of their time commitment.”Frank Amberg,Managin

82、g Director,Head of Infrastructure Germany,AltamarCAM PartnersFigure 14.Evolution of PE transaction market by activity(next 12 months vs.last 12 months)Source:Arthur D.Little,Invest EuropeSource:Arthur D.Little,Invest EuropeFigure 14.Evolution of PE transaction market by activity(next 12 months vs.la

83、st 12 months)20242022202371%68%21%63%26%68%19%18%No.of transactions17%Valuation multiplesNo.of transactions14%Valuation multiples9%6%HigherSameLess40%28%33%32%18%33%27%58%54%56%10%11%13%21%14%14%66%81%81%83%4%6%11%6%GPLP1 55.E XIT S BECOME THE PRIORIT Y FOR PE,AI DOMINATES NE W WORKING PR AC TICESEx

84、iting portfolio companies has become the most important future activity for PEs.Two-thirds of GPs expect it to be the main focus of their teams over the next 12 months,a sharp rise from just a third two years ago(see Figure 15).Although returning capital to investors is seen as a pressing priority,m

85、ost GPs are still focused on activities that can further boost their portfolio companies.Some 59%see operational development and support of their businesses as a main focus,while 65%view AI as a key area of activity.Risk assessment at portfolio companies ranks at the bottom of the list of priorities

86、,reflecting the expected easing of interest rates and inflation,and some degree of comfort with company performance through the volatile market conditions of the last two years.At the portfolio level,measures to drive growth against an improving market backdrop are clearly the highest priority,with

87、acquisition-led expansion the most important initiative,selected by around three-quarters of GPs (see Figure 16).Digitalization remains an important focus as firms continue to incorporate technologies such as big data analytics and cloud infrastructure.However,it is steadily declining in importance,

88、underlining that this is a one-off operational lever that will become less relevant over time as more companies adopt the technology.AI usage is a new initiative cited by a large minority(39%)of GPs.Given their expectations and current exploration of potential AI uses across firms,this is likely to

89、become a more important initiative for GPs at portfolio companies.Figure 15.Focus of teams(next 12 months vs.last 12 months)Source:Arthur D.Little,Invest EuropeSource:Arthur D.Little,Invest EuropeFigure 15.Focus of teams(next 12 months vs.last 12 months)55%66%51%25%31%31%36%34%45%72%65%69%9%1%4%3%3%

90、35%56%42%25%30%47%43%51%68%68%18%1%7%7%2%66%65%59%53%28%27%20%31%34%41%44%67%70%77%Exit of portfolio companiesAIOperational development of/support to portfolio companiesProprietary originationDue diligenceRegulatory,compliance&IR communication tasksRisk assessment inportfolio companies3%1%0%3%5%3%3%

91、N/AN/AN/AMoreSameLess202420222023GPNew response option 20241 6REPORT:THE INSIGHT:STATE OF THE EUROPEAN PRIVATE EQUIT Y INDUSTRY16ARTHUR D.LITTLEWhen looking at expected future focuses,we see that more than 80%of firms,including those that have not yet adopted AI,are eyeing its potential(see Figure 1

92、7).More than eight in 10 respondents believe the technology will have an impact on their operations in the near future,signaling the likelihood that most managers will incorporate AI into areas such as deal origination,due diligence,or reporting.Other issues driven by current trends include geopolit

93、ical risk,cited by over 60%of GPs.Investor relations toward LPs are also expected to have an impact by the majority of GPs,reflecting ongoing challenges in the exit and fundraising markets.MANY GPs HAVE ALREADY ADOPTED NEW APPROACHES AND STANDARDS FOR ESG AND DE&IAlthough still important to a large

94、numbers of GPs,attention to ESG,diversity and inclusion,and managing portfolio companies through KPIs have declined in importance since last year.This may be a signal that,as a result of investor demand and regulation,many GPs have already adopted new approaches and standards on these issues and tha

95、t best practices are increasingly ingrained industrywide.Figure 16.Most important improvement initiativesSource:Arthur D.Little,Invest EuropeSource:Arthur D.Little,Invest EuropeFigure 16.Most important improvement initiatives65%57%54%52%36%34%24%19%14%74%57%54%48%45%39%37%22%21%Acquisition-led growt

96、hDigitalizationOrganic growthCost reductionESG,including DE&IUsage of AIGeographic expansionCustomer retentionLiquidity financing10%Right-sizing69%60%60%52%49%48%24%14%9%GP202420222023New response option 2024Figure 17.Expected changes in near future,GP daily operationsSource:Arthur D.Little,Invest E

97、uropeSource:Arthur D.Little,Invest EuropeFigure 17.Expected changes in near future,GP daily operations20242023GP82%61%63%61%55%42%42%18%38%36%36%45%50%58%Attention to work practicessupported by AIAttention to geopolitical riskInvestor relationscommunication toward LPsAttention to ESGAttention to ris

98、k managementAttention to diversity&inclusion issuesManaging portfoliocompanies through KPIsMoreNo changeLess61%59%81%54%67%71%39%41%19%46%32%29%N/ANew response option 20241 7Investors continue to see attention to ESG issues as the most important factor for PE in the near future,cited by more than tw

99、o-thirds of LPs(see Figure 18).Although this is significantly higher than for GPs,it reflects the perspective of LPs who back a number of firms and may still need to work with a diminishing number of GPs who have yet to fully embrace ESG best practices.Conversely,attention to work practices supporte

100、d by AI is of lower importance and relevance to many investors,demonstrating how adoption of the technology is more of an internal factor for GPs seeking efficiency and an edge in investment processes than one with significant impact on LP-facing activities.Cyber threats remain the largest issue for

101、 GPs,with about three-quarters expecting cybersecurity assessments to influence their future due diligence processes(see Figure 19).AI assessments have entered high on the list,with almost 70%expecting increased due diligence as GPs come to grips with the opportunities and risks posed by the technol

102、ogy.Almost two-thirds of GPs expect ESG to remain an area of increased focus,despite it being the top priority for managers last year.Again,this does not necessarily mean ESG has become less important compared to other issues or previous years.Rather,it suggests that more GPs now see ESG as an integ

103、ral part of their due diligence or feel their ESG due diligence processes are up to standard,aided by best practice resources such as Invest Europes GP ESG Due Diligence Guide,which includes a comprehensive ESG Due Diligence Questionnaire.The risks posed by financial crises and pandemics are also ex

104、pected to be less of a focus for the vast majority.Geopolitical assessments,in contrast,are expected to continue to receive increased due diligence attention from more than half of GPs,as the effects of international conflicts continue to ripple through markets.Figure 18.Expected changes in near fut

105、ure,LP daily operationsSource:Arthur D.Little,Invest EuropeFigure 19.Areas receiving increased attention in future due diligence processesSource:Arthur D.Little,Invest EuropeSource:Arthur D.Little,Invest EuropeFigure 18.Expected changes in near future,LP daily operations2024202368%52%44%35%35%32%29%

106、31%48%56%65%64%68%69%Attention to ESGRequirements on fundportfolio company KPIsAttention to geopolitical riskAttention to risk managementAttention to work practicessupported by AIInvestor relationscommunication from the GPAttention to diversity&inclusion issuesMoreNo changeLess70%70%43%44%33%40%30%3

107、0%57%55%66%58%N/ALPNew response option 2024Source:Arthur D.Little,Invest EuropeFigure 19.Areas receiving increased attention in future due diligence processes2023GP2024GPCybersecurity assessmentsAI impact assessmentsESG assessmentsGeopolitical assessmentsDigitalization maturity assessmentsIntellectu

108、al capital assessmentsGlobal/systemic financial crisesPotential future pandemicsNo change expectedOther74%75%69%61%78%51%54%48%55%14%14%10%30%4%12%2%2%0%5%New response option 20241 8REPORT:THE INSIGHT:STATE OF THE EUROPEAN PRIVATE EQUIT Y INDUSTRYARTHUR D.LITTLE1 96.SUSTAINABILIT Y REGUL ATION HAS S

109、IGNIFICANT IMPAC T ON FUNDS&REQUIRES RESOURCESThe majority of GPs expect the EUs Sustainable Finance Disclosure Regulation(SFDR)to continue to shape fund focus and categorization(see Figure 20).An important minority perceive that LPs no longer want to invest in Article 6 funds that have less of a su

110、stainability focus,and another 55%and 13%,respectively,perceive that LPs require or will require funds to comply with Article 8 or Article 9 rules,effectively meaning that 83%of GPs perceive they need to have a strong focus on ESG objectives or position themselves as“impact”funds.LP views on the imp

111、act of SFDR are slightly less progressive than those of GPs(see Figure 21).Only 1%say they no longer want to invest in Article 6 funds,and more than half(53%and 22%,respectively)expect GPs to register their funds as Article 8 or Article 9 now or in the near future.Still,around a quarter of LPs expec

112、t no change in fund categorization among GPs.Figure 20.GPs perception of LPs shift in expectations on fund categorization under SFDRSFDR=Sustainable Finance Disclosure RegulationSource:Arthur D.Little,Invest EuropeFigure 21.LPs views on fund categorization under SFDRSource:Arthur D.Little,Invest Eur

113、opeSFDR=Sustainable Finance Disclosure RegulationSource:Arthur D.Little,Invest EuropeFigure 20.GPs perception of LPs shift in expectations on fund categorization under SFDR20242023Yes,to a certain extent there is an increasing expectation from LPs to register funds as Article 8 or 9(“green”funds)Yes

114、,very much so LPs no longer wish to invest in Article 6 fundsNot yet but I am sure this will change in the near futureNo and I dont think this will change15%55%13%10%7%13%59%20%5%3%GPNot subject to SFDRHave you experienced a shift in expectations from LPs as to fund categorization under SFDR?Source:

115、Arthur D.Little,Invest EuropeFigure 21.LPs views on fund categorization under SFDR1%53%22%23%3%55%26%16%Yes,to a certain extent we increasingly expect GPs to register their funds as Article 8 or 9(“green”funds)Yes,very much so we no longer wish to invest in Article 6 fundsNot yet but I am sure this

116、will change in the near futureNo and I dont think this will change20242023LPHave you shifted your expectations as to fund categorization by GPs under SFDR in the recent past?2 0REPORT:THE INSIGHT:STATE OF THE EUROPEAN PRIVATE EQUIT Y INDUSTRYARTHUR D.LITTLEThe vast majority of GPs envisage some form

117、 of impact on their resources and internal operations from SFDR,although,again,that impact is softening at the margins(see Figure 22).Almost half of respondents see a high impact,requiring dedicated in-house personnel or external consultants,a modest reduction on last year.Around a quarter see a mod

118、erate impact that does not require dedicated resources,again slightly lower than last year.And some 16%expect very low impact from the regulation,already having all the necessary staff and processes in place.As more GPs register their funds as Article 8 or 9,the impact of the regulation may lessen,s

119、ince having dedicated ESG professionals(or at least ESG experience across existing teams)will become the industry norm.It is also likely that a growing knowledge about how to apply the regulation in practice will lead to a higher effectiveness of its application over time.LP VIEWS ON THE IMPACT OF S

120、FDR ARE SLIGHTLY LESS PROGRESSIVE THAN THOSE OF GPsThe expansion of the EU sustainability regulatory regime via the creation and implementation of the Corporate Sustainability Reporting Directive(CSRD)adds a layer of ESG compliance to PE.Depending on the size of the firm and the assets it invests in

121、,CSRD can require reporting both from the GP and its portfolio companies.Unsurprisingly,the vast majority see some form of impact,with around half expecting high impact that requires dedicated resources,echoing expectations around SFDR(see Figure 23).A small minority see limited impact,while around

122、one in 10 are still in the preparatory phase.Figure 22.SFDRs impact on firm resourcesSource:Arthur D.Little,Invest EuropeFigure 23.CSRDs impact on firm resourcesCSRD=Corporate Sustainability Reporting DirectiveSource:Arthur D.Little,Invest EuropeSource:Arthur D.Little,Invest EuropeFigure 22.SFDRs im

123、pact on firm resourcesHigh impact including dedicatedin-house and/or external personnelModerate impact withoutdedicated personnelLow impact all resourceswere in place alreadyDifficult to assess we are still inthe preparatory phaseNot subject to SFDR47%26%16%5%7%High impact includingdedicated personn

124、elModerate impact withoutdedicated personnelLow impact all resourceswere in place alreadyDifficult or too early to assess we are still in the preparatory phaseNot subject to SFDR50%29%10%6%5%GP20242023CSRD=Corporate Sustainability Reporting DirectiveSource:Arthur D.Little,Invest EuropeFigure 23.CSRD

125、s impact on firm resources49%High impact including dedicated in-house and/or external personnel23%Moderate impact withoutdedicated personnel12%Low impact all resourceswere in place already9%Difficult or too early to assess we are still in the preparatory phase6%Not applicableGP2 1As a directive,CSRD

126、 requires transposition into member state law.The deadline for such national legislation was July 2024,yet some countries have not fully transposed the directive,and others chose to enhance the rules with additional requirements.Although this adds complexity(on top of the ongoing uncertainties aroun

127、d CSRDs scope and boundaries of application),CSRD may primarily be a domestic compliance requirement at the portfolio company level.Some GPs may choose to support their companies in preparing for and meeting the directive;others may take a less interventionist approach,limiting their efforts to crea

128、ting awareness of the obligations under CSRD and corresponding timelines.The negative impacts of sustainability-related disclosures feature prominently on the list of regulatory issues for GPs and have become much more important over the past year (see Figure 24).THE NEGATIVE IMPACTS OF SUSTAINABILI

129、TY-RELATED DISCLOSURES FEATURE PROMINENTLY ON THE LIST OF REGULATORY ISSUES FOR GPsFund manager-focused regulations,including AIFMD and ELTIF,are still perceived as the most negative,given their direct impact on GP operations.However,given the increased adoption of ELTIF 2.0 vehicles by a wide range

130、 of managers following updated rules in January 2024,such regulated assets can be viewed as an opportunity to broaden the reach and appeal of PE to investors.Figure 24.Regulatory issues ranked in terms of negative impact on business operationsNote:(1)At fund,fund manager,investor,and/or portfolio co

131、mpany level(e.g.,SFDR,CSRD);(2)national FDI regimes,EU rules on foreign subsidiariesSource:Arthur D.Little,Invest EuropeNote:(1)At fund,fund manager,investor,and/or portfolio company level(e.g.,SFDR,CSRD);(2)national FDI regimes,EU rules on foreign subsidiariesSource:Arthur D.Little,Invest EuropeFig

132、ure 24.Regulatory issues ranked in terms of negative impact on business operations2023GP2024GP4.44.33.53.33.32.34.52.64.73.33.52.5Fund-manager regulations(AIFMD,ELTIF,etc.)Regulations prescribing sustainability-related disclosures1Tax regulation on fund structures(regulation of shell entities)and/or

133、 capital income(withholding tax or tax on capital gains)Limitations to foreign investments in Europe2Limitations to institutional investor access to venture&PE investmentsVarious regulatory requirements on portfoliocompanies production/product or processes2 2REPORT:THE INSIGHT:STATE OF THE EUROPEAN

134、PRIVATE EQUIT Y INDUSTRYARTHUR D.LITTLEThe macro backdrop at last appears to be improving,and that is having a positive impact on sentiment in the European PE and VC industry.Stabilization in inflation and falling interest rates are feeding green shoots.Modest increases in exits in the first half ar

135、e expected to accelerate,and bottoming fundraising and investment activity are expected to rise.VC investment has turned a corner,with buyouts and growth increasingly seeing headwinds easing and tailwinds strengthening.As we saw in the rebound from the effects of COVID-19,that recovery could be sign

136、ificant,particularly given the twin drivers of LPs demands for distributions and GPs record levels of dry powder.Add new opportunities in AI and defense to existing technology,health,and business services,and more pieces of the puzzle begin to fall into place.Volatility and uncertainty are never far

137、 away,however.Escalating conflict in the Middle East could have global implications,including on already volatile energy prices and supply.A new US administration could reignite trade wars with Beijing and even Europe.These risks are highly unpredictable but should not be underestimated.Shocks and s

138、urprises tend to be relatively short term or at least shorter than the average PE cycle.Moreover,GPs are focused on secular themes that will reshape the economy and society over the long term,rather than sectors that are excessively exposed to consumer spending and cyclical industries.This is very m

139、uch in line with investor priorities and the EUs drive to become more competitive.Europes digital future,green transitions,and growth require far more investment than public coffers have available.Private capital is not only needed but welcomed,even if it comes with increased regulation.The coming 1

140、2 months point to a recovery in activity,and the longer-term trajectory for the industry remains strongly positive.CONCLUSIONAbout ADLs survey-The survey includes answers from 259 respondents:-158 answers are from representatives of European GPs covering several investment strategies,including mid-b

141、uyout,growth,large buyout,infrastructure,VC,and real estate.-101 answers are from representatives of LPs covering several types of investors,including fund of funds,sovereign wealth funds,insurance companies,pension funds,family offices,academic institutions,corporate investors,and banks.-The survey

142、 focused on Europe.2 3Arthur D.Little has been at the forefront of innovation since 1886.We are an acknowledged thought leader in linking strategy,innovation and transformation in technology-intensive and converging industries.We navigate our clients through changing business ecosystems to uncover n

143、ew growth opportunities.We enable our clients to build innovation capabilities and transform their organizations.Our consultants have strong practical industry experience combined with excellent knowledge of key trends and dynamics.ADL is present in the most important business centers around the world.We are proud to serve most of the Fortune 1000 companies,in addition to other leading firms and public sector organizations.For further information,please visit .Copyright Arthur D.Little 2024.All rights reserved.