Q2’25 Pulse of Private Equity

During Q1’25, the EMA region announced $109.2 billion in private equity investment across 1,555 deals —both figures falling well short of the pace set in early 2024. The slowdown likely reflects a combination of macroeconomic and political headwinds, including general elections in Germany in February 2025 and France in the second half of 2024, sluggish economic conditions in the UK, and growing uncertainty surrounding US trade policy, which weighed on investor sentiment toward the end of the quarter.

PE investment falls amid day-to-day tariff uncertainty

Q2’25 saw PE investment in the EMA region fall from $136.6 billion across 1,850 deals to $117.4 billion across 1,669 deals — nine and nineteen quarter lows, respectively. The challenge for many PE investors in the region wasn’t the application of tariffs so much as the ongoing changes and the inability to predict what will happen from day-to-day. This caused a significant and abrupt end to some dealmaking activity until the uncertainty levels out, especially in sectors like automotive and industrial manufacturing; the automotive sector in particular was down significantly — with $2.1 billion invested as of midyear, as compared to 2024’s annual total of nearly $10 billion.

UK sees robust PE investment in Q2’25, while other jurisdictions see more muted results

Within the EMA region, the UK continued to attract the largest share of PE investment, attracting $36.8 billion — up from $24.9 billion in Q1’25. The UK attracted the two largest deals of the quarter in EMA, including the proposed $5.1 billion take private of precision measurement instruments maker Spectris by Advent International (followed an early Q3’ 2025 competing bid of $6.5 billion by KKR)¹, and the $3.1 billion buyout of post-trade solutions fintech OSTTRA Group by KKR.²

PE investment in Germany fell slightly between Q1’25 and Q2’25 — from $16.9 billion across 214 deals to $15 billion across 148 deals; the largest deals in Germany occurred in the fintech and utilities spaces, including the $2 billion buyout of cloud security firm Hornetsecurity by cybersecurity and compliance company Proofpoint and Stonepeak and Energy Equation Partners’ $1.6 billion buyout of a majority share of fuel retailer JET Tankstellan Deutschland from Phillips 22. Meanwhile, after a solid Q2’25, PE investment in France fell quarter-over-quarter — from $29.5 billion across 239 deals to $14.5 billion across 196 deals.

Tech-enabled solutions continuing to attract attention; life sciences and healthtech stand out

A number of sectors showed significant resilience to the pause in PE investment this quarter — primarily those focused on technology enablement, including software-focused solutions, healthtech and life sciences, and fintech. Healthtech and life sciences were particularly notable. In the life sciences space, investment hit $6.4 billion at mid-year — a six-year high with six months remaining in the year, with Q2’25 deals including the $2.8 billion secondary buyout of Sweden-based Karo Healthcare and the $1.2 billion buyout of UK-based HBI Health & Beauty Innovations. Healthtech continued to trend well ahead of 2024’s investment pace, attracting $26.6 billion by the end of Q2’25 compared to $37.2 billion for all of last year — despite a slight decline in overall deal volume. The domestic and regional focus of these industries, in addition to the ongoing drive to modernize healthcare systems in many jurisdictions, likely helped keep PE investment in the sector very robust.

Regional focus coming to the forefront in EMA

Given the current wave of trade and geopolitical uncertainties, there is a growing movement in the EMA region to become less dependent on global economies. Both the EU and individual jurisdictions like the UK, Germany and France have introduced very large tranches of funding this year to help support domestic innovation and enhance technology sovereignty over the next decade. This backlog of funding, combined with the significantly lower valuations of European companies is helping to balance out some of the current uncertainty in the market with a sense of optimism for future regional investment opportunities.

Defensetech growing on the radar of PE firms

Historically, many PE firms have exited defense-sector investments — not necessarily due to underperformance, but because these assets did not align with the investment mandates or ESG criteria of a number of funds at the time. Several firms sold off their defense holdings as recently as a few years ago. This has changed dramatically over the last couple of quarters in the region as governments have prioritized defense sector innovation out of the desire to boost regional and jurisdictional capabilities. The sentiment among PE investors has become very positive on the defensetech front, with the expectation that this will be a booming sector in the quarters and years to come. During Q2’25, France saw PE firm Tikehau Capital, CNP Assurances, CARAC Group, and the Societe Generale Assurances join together to launch the Tikehau Defense and Security fund — with an initial commitment of $175 million — to support the growth of defence focus sectors, including cybersecurity and aeronautics.

Trends to watch for in Q3’25

While Q3’25 could be somewhat soft until tariff deals are confirmed and there is more certainty, the long-term outlook for PE investment in the EMA region is quite positive, with more PE firms directing funds towards Europe, in addition to the numerous government initiatives and funding programs aimed at spurring development and innovation.

While IPO exit activity is expected to remain very dry in the EMA region over the remainder of the year, given a number of companies that had considered listings later this year have either postponed or paused their plans, high-quality assets will continue to find buyers.