The Silent Exodus: How Private Equity is Reshaping Europe's Public Markets

Over the past decade, European equity markets have experienced a significant transformation. According to a report by HSBC Global Research and New Financial, more than $1 trillion in market capitalisation has been removed from European exchanges as 1,013 listed companies were acquired by private equity or unlisted entities. In contrast, only 130 companies have transitioned their listings to the U.S. market during the same period. ​

The Rise of Private Capital

The allure of private capital has grown, driven by abundant dry powder and a desire for greater control. Private equity firms are capitalising on undervalued European stocks, with notable acquisitions such as KKR's €22 billion purchase of Telecom Italia's NetCo and Blackstone and Permira's $13 billion acquisition of Adevinta. ​

In 2024 alone, private equity deals in Europe surged by 78% compared to the previous year, reaching approximately $133 billion. ​

Implications for Public Markets

This shift towards private ownership has several implications:​

• Reduced Liquidity: The migration of companies from public to private markets diminishes the liquidity of European exchanges, making it more challenging for investors to buy and sell shares efficiently. ​

• Decreased Transparency: Private companies are not subject to the same disclosure requirements as public ones, leading to less transparency for investors and regulators.​

  Limited Access for Retail Investors: As more companies go private, retail investors have fewer opportunities to invest in a diverse range of businesses.​

The UK Perspective

The UK has been particularly affected, with significant companies like Wm Morrison and Worldpay being taken private. In 2024, over £50 billion worth of London-listed companies were acquired, and projections suggest that up to a third of smaller companies on the AIM market could be targeted in 2025. ​

MY OPINION

The trend of private acquisitions poses a substantial challenge to the vibrancy and accessibility of European capital markets. While private equity can offer strategic benefits and operational efficiencies, the erosion of public markets undermines transparency, reduces investment opportunities for the broader public, and may hinder the financing of innovation and growth.​

Policymakers and regulators must address this shift by enhancing the attractiveness of public markets through reforms that balance investor protection with flexibility, ensuring that public markets remain a viable and appealing option for companies seeking capital.