Europe’s private equity industry is entering the second half of 2026 with surprising resilience. While higher interest rates, geopolitical tensions and fundraising pressures would normally be expected to cool activity, European buyout firms have continued to strike deals, execute blockbuster exits and attract capital to established managers, said Pitchbook in its latest European PE Breakdown report published on 10 July 2026.

The region is increasingly distinguishing itself from the US through its fragmented markets, lower valuations and greater opportunities for operational value creation. Yet beneath the encouraging headlines lies a more uneven picture: liquidity remains concentrated in a handful of mega-transactions, fundraising is becoming increasingly selective, and the outlook for the rest of the year will depend heavily on monetary policy and the pace of investor distributions.

Deals keep rolling

European private equity dealmaking remained remarkably robust during Q2. Deal value rose 6.9% quarter on quarter despite a more challenging macroeconomic backdrop, putting 2026 on course for a record year by deal count and close to historic highs by value (see Chart 1).

The resilience is particularly striking given the European Central Bank’s first interest-rate increase since 2023. Pitchbook explained that higher borrowing costs traditionally weigh on leveraged buyouts, yet European sponsors have continued to deploy capital while the US market has experienced a much sharper slowdown.

Industry executives increasingly argue that Europe offers structural advantages unavailable elsewhere. Fragmented markets, lower entry multiples and a large universe of family-owned businesses provide opportunities for active investors to generate returns through operational improvements rather than simply relying on market appreciation.

Europe gains ground

The performance gap between Europe and the US has widened significantly this year.

While US deal value fell sharply during Q2, European transaction value continued to grow. Although the US remains the larger market overall, Europe has narrowed the gap considerably compared with 2025 (see Chart 2).

Another notable trend is the continued dominance of add-on acquisitions, which remain at decade-high levels as firms expand existing portfolio companies rather than pursuing entirely new platforms (see Chart 3). Growth investments have also gained modest market share as lower financing costs earlier in the year encouraged sponsors to back businesses with strong revenue expansion prospects.

Whether this trend continues will depend on the future direction of interest rates, argued the report. A prolonged tightening cycle could shift investor preference back towards traditional leveraged buyouts.

Megadeals drive growth

Large transactions are increasingly shaping the European market.

Megadeals (larger than €1bn) accounted for 35% of total deal value during the first half of the year, up from just over 32% in 2025. Take-private acquisitions have become especially prominent as listed European companies continue to trade below private-market valuations.

One of the standout transactions was EQT’s €12.6bn acquisition of Intertek after several unsuccessful approaches. Overall, 11 take-private transactions generated almost €20bn during Q2, highlighting private equity’s willingness to pursue sizeable public targets despite market uncertainty.

The UK has also strengthened its position as Europe’s largest private equity market, capturing 30% of total deal value. Cross-border transactions now account for more than 70% of European deal value, underlining the increasingly international nature of the region’s capital flows.

Exit values rebound

The exit market delivered one of the quarter’s biggest surprises.

Exit value climbed almost 30% compared with Q1, reaching its strongest quarterly performance in three years (see Chart 4). However, the recovery remains highly concentrated. Just 22 mega-exits generated nearly two-thirds of total exit value, suggesting liquidity has improved only for owners of the largest assets.

Germany dominated regional activity thanks to Advent International and Cinven’s €29.4bn sale of TK Elevator to Kone, alongside Innio’s Nasdaq listing, both of which helped push DACH exit value to record levels.

Corporate buyers overtook financial sponsors (see Chart 5) as the leading exit route during the quarter, reflecting greater caution in public equity markets and stronger demand from strategic acquirers seeking industrial and technology assets.

Meanwhile, continuation vehicles continue to provide an alternative source of liquidity, although GP-led secondary activity has eased slightly compared with last year (see Chart 6).

Fundraising faces reality

Fundraising remains the weakest part of the market.

European private equity is still on track for its slowest fundraising year in a decade, with investors concentrating commitments among proven managers (see Chart 7). Funds between €1bn and €5bn accounted for more than half of all capital raised during the first half of 2026.

Successful firms continue to attract strong demand. Several large mid-market vehicles closed quickly, demonstrating that institutional investors remain willing to back established franchises. However, the broader trend is one of consolidation, with limited partners reducing the number of general partner relationships and becoming increasingly selective when making new commitments.

France and the Benelux region led fundraising during the first half, supported by several large Dutch funds and ongoing pension reforms that are steadily increasing allocations to private markets.

According to Pitchbook, the second half of 2026 will largely depend on two factors: whether exits generate sufficient distributions to recycle capital back to investors and whether monetary policy becomes more restrictive. Several flagship European funds remain in the market, making the coming months an important test of investor confidence.