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But as the consolidation wave in European telecoms and media companies slowed, buyout firms came to the fore. They soon found a role as scavengers, snapping up assets from overextended telecoms and extraneous parts of European conglomerates that suddenly found themselves under pressure to rationalize. Money came pouring into London-based buyout funds such as BC Partners and CVC Capital Partners, which each raised €3 billion-plus funds in 2000, as limited partners sensed the chance to earn outsized returns. In a telling sign of what the future would hold, Kohlberg Kravis Roberts & Co. raised a similar-sized fund that year to target Europe exclusively. All that money was bound to breed deals, and breed deals it did.
Long after the U.S. buyout market closed down in the wake of the Nasdaq crash of 2000 and Sept. 11, European private equity dealflow was still gaining momentum. Europe narrowly edged out the U.S. in buyout volume in 2000, at $41.6 billion. The next year it hit $45.4 billion, which was four times the $11.3 billion in the U.S. In 2002 the European total shot up to $57.1 billion, which was twice the U.S. figure. In a deal that embodied the powerful rationalizing forces driving European dealmaking, in 2002 KKR paid $1.7 billion for four industrial businesses that had been part of Mannesmann:
Vodafone, an Anglo-Saxon firm par excellence, wasted no time disposing of this industrial baggage in 2000. Siemens AG, a bloated German conglomerate, bought a shopping basket of Mannesmann pieces in order to get its hands on some auto components makers. When Siemens came under pressure to unload the rest, KKR was ready to pick up the discards. KKR's deal was also emblematic of a second shift in the European world. Historically, London firms like Apax Partners, BC Partners, CVC and Schroder Ventures (now Permira) had owned the European buyout market. But by the early part of the decade, Carlyle Group, KKR, TPG Capital and, later, Blackstone Group LP and Bain Capital set up shop and began combing Europe for deals. Like British banks before them, the U.K. buyout shops now had stiff competition on their home turf from bigger American firms. The staggering amounts of capital flowing into private equity funds would soon drive the focus back to the U.S., however. With freshly raised funds of $10 billion to $20 billion, the largest buyout houses targeted bigger and bigger companies to absorb all that equity, which, in practice, meant public companies. But it is painfully difficult to take a continental European public company private. As the buyouts passed the $5 billion, then $10 billion, then $20 billion mark for the first time since 1989, only a handful of the largest deals at the peak of the market -- Alliance Boots plc, Philips Semiconductor (now NXP) and VNU (now the Nielsen Co.) -- were European. It's anyone's guess which market will return to health sooner. Political resistance to LBOs in Europe heated up when the economy was healthy and could deter a recovery. On the other hand, Europe is still ripe with opportunities for consolidation and rationalization. That probably ensures that Europe will live to see another day in the buyout sun. - John E. Morris John E. Morris is a senior private equity writer for The Deal. CategoriesPrivate capital video
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When the new millennium dawned, Europe's private equity dealmakers, like their counterparts in America, were overshadowed by a frenzy of corporate dealmaking. In February 2000, after a two-month struggle, Vodafone Airtouch plc wrestled German cell-phone operator Mannesmann AG to the mat, leading to a €181 billion (at the time $180 billion) takeover that is still tied with AOL's takeover of Time-Warner as the largest merger ever. As the decade began, Jean-Marie Messier was transforming Vivendi SA, a one-time water utility (with what turned out to be dubious accounting), into a media giant via a $34 billion merger with the Bronfmans' Seagram Co. 
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