Gatti Pavesi Bianci Ludovici’s Andrea Giardino: Why PE firms could be the big winners in Europe

In this excerpt from our 2025 European M&A Outlook Report, which features insights from 12 leading European dealmakers, Andrea Giardino, Equity Partner at Gatti Pavesi Bianci Ludovici, discusses the drivers, sectors and regions that could move the M&A market in 2025 and explains why private equity (PE) firms could be the big winners in next year’s deal race.

Global M&A activity in 2024 was on the rise – certainly in value if not volume terms after a disappointing 2023 – do you expect more activity and how do you view the European M&A market for the next 18 months and beyond?

The recovery in terms of value in 2024 is an encouraging sign, reflecting global market evolution and renewed investor confidence. In the European market, I foresee steady growth over the next 18 months, with a particular focus on innovative and sustainable sectors such as technology, renewable energy and infrastructure, supported by favourable policies and green transition initiatives. The main obstacles to dealmaking, however, remain the persistent valuation gap and the uncertainties surrounding interest rate cuts, which have not met the expectations set earlier in the year. 

However, current geopolitical instability, compounded by recent developments, introduces an additional layer of complexity and caution within the M&A landscape. Markets are likely to remain prudent as stakeholders navigate uncertain outlooks tied to geopolitical tensions, supply chain disruptions and shifting global trade dynamics. This prudence could temper the pace of recovery, emphasising the importance of strategic planning and risk assessment for dealmakers looking to capitalise on emerging opportunities in this uncertain environment.

Are there any regions, or indeed specific countries/markets, or sectors/subsectors that you think will outperform in M&A terms between now and the end of 2025?

Northern and Central Europe, along with emerging markets in the Baltics, are likely to stand out due to their stability and attractiveness for foreign investors. In addition, the spotlight could also shine on the Nordic countries, where strong innovation in the pharmaceutical and biotech fields has generated significant interest from international investors in both large and small companies. 

This growing attention is not only fuelled by the region's robust ecosystem of cutting-edge research and development but also by the presence of globally influential pharmaceutical giants that continue to shape the market. Furthermore, outstanding investment in research, supported by both private and public sectors, has reinforced the Nordic pharma market's reputation as a powerhouse, solidifying its position as a hub for lucrative opportunities within the global healthcare landscape. 

As for the Italian market, we can expect growth to be driven by a wave of small and medium-sized deals and a series of add-ons, which will act as building blocks for the formation of more resilient and competitive groups. This fragmented approach will allow mid-sized firms to scale and solidify their market positions while enabling larger players to expand their reach and strengthen their dominance across key sectors, and the resulting landscape might be characterised by expanded market leaders.

With an abundance of dry powder, a willingness to deploy, and a desire to get back to the dealmaking table after a lacklustre 2023, what do you think will happen to the level of European PE activity between now and the end of 2025?

European PE activity is set to rebound significantly, fuelled by record levels of dry powder and the urgency to deploy capital. We can expect increased competition for high-quality assets, with a focus on sectors offering robust growth potential, such as technology, clean energy and healthcare. The fact that aggregate deal value has gone up, whereas the number of transactions has seen a decline indicates that larger, more stable businesses are being favoured over smaller ones. This could reflect a strategic approach to mitigate risk, especially in uncertain economic conditions, as larger businesses often come with proven track records, stronger cash flows and robust operational frameworks. 

Secondary buyouts and carve-outs are also likely to gain prominence as PE firms seek to maximise value creation in a dynamic market environment. The sale of non-core assets by larger corporations is expected to emerge as one of the most significant driving forces behind sell-side activity in the European M&A market. As companies increasingly focus on streamlining operations, optimising their portfolios and reallocating resources to core business areas, divestitures of non-essential divisions and underperforming units are likely to accelerate.

What do you expect to be the primary driver of M&A activity in 2025?

The primary driver of M&A activity in 2025 will be the pursuit of strategic growth, particularly through technological innovation and market consolidation. Companies will seek to strengthen their positions in fast-evolving industries such as renewable energy, fintech, and artificial intelligence (AI). Sub-sectors such as software services, cybersecurity and cloud computing will all be relevant. Additionally, as the AI Act entered into force on 1 August 2024, due diligence in that sector will be more streamlined and buyers will be able to better assess information on the ownership of AI generated content.

Insolvencies and bankruptcies have been trending upwards for the last few years, which is feeding into more distressed/turnaround M&A opportunities and corporate disposals. What conditions will have to be met before the market regains confidence?

For the market to regain confidence, several conditions must be met: a reduction in interest rate volatility, improved access to financing and clearer visibility on macroeconomic stability. Governments and central banks may also need to implement targeted policies to mitigate the impact of inflation and support struggling sectors. Once these factors align, confidence in the M&A market will likely strengthen. Distressed opportunities are set to play an important role in driving M&A activity, as sectors such as real estate, retail, hospitality, and manufacturing face mounting economic challenges. These industries are particularly susceptible to market fluctuations, operational disruptions and shifts in consumer behaviour, leaving many businesses undervalued or financially strained. This vulnerability positions them as prime acquisition targets for cash-rich competitors and strategic investors who are well-positioned to capitalise on these market dynamics.

Which sectors do you believe will move to more aggressive growth strategies in their M&A programmes, as opposed to more defensive dealmaking?

Sectors such as technology, renewable energy, and healthcare are likely to adopt more aggressive growth strategies. In particular, tech companies will focus on acquiring capabilities in AI and data analytics, while renewable energy firms will accelerate investments to meet decarbonisation targets. Healthcare businesses, especially those in biotech and MedTech, will pursue M&A to expand their innovation pipelines and geographical reach. This strategic shift is driven by the increasing pressure on businesses to stay competitive in a rapidly evolving global environment.