Private takeovers have stripped more than $10 from the European stock market over the past decade.
This trend poses a “far greater threat” to the European capital market than the asylum of listed companies, according to a new report from HSBC Global Research and Think-Tank New Financial.
The report identifies 1,013 European listed companies that have been acquired by private or private companies over the past decade, compared to 130 companies that have moved to the US stock market.
“The lack of proper recognition of the value of a company on such a scale is a problem,” said Ian Stuart, senior executive at HSBC. “There is a clear sense of balance that changes from the open market to the private market,” the report said.
The European stock market has lagged behind the Wall Street rise index, which has been driven by the large tech stock bull rally in recent years. This has sparked concern among policymakers about the state of the continental capital market, urging companies to seek public listings across the Atlantic, and to make them more vulnerable to acquisitions as stock prices slow.
Last year, Abu Dhabi National Petroleum Company acquired the listed German materials group Covestro Private for 14.7 billion euros, while KKR acquired Netco, the network operator of Telecom Italia, for a 220 billion euros deal. Norway-based Adevinta was snapped to Blackstone and Permira in 2023 in a $130 billion deal.
The London stock market has felt the impact of private capital in recent years as it has lost companies such as Morrisons, World Pay and Hargreaves’ Lansdown.
Donald Trump has also warned market volatility as he announced that his “mutual” tariffs could accelerate trends by making them cheaper and more attractive to private takeovers.
Apostolos Thomadakis, research director at the European Institute for Capital Markets, said private acquisitions pose “a great risk” by separating public investment from Europe and further reducing participation in regional markets.
“As more and more companies leave the national market, liquidity in the European market will decline,” he said, adding that the decline in liquidity is “why not being able to fund startups, why they are leaving Europe.”
Thomadakis meant that the transition to private capital would “decrease transparency” and “dampen price discoveries,” and that there was a risk that the continent would lose control of strategically important companies over non-European private actors.
At the same time, the private equity and debt market has grown rapidly in recent years, reducing the need for businesses to go through public market listings or debt issuance requirements.
Goldman Sachs CEO David Solomon said this year that businesses can “get their own funds on a large scale.”
Despite the Wall Street premium declines in sales this month, European stocks remain cheap compared to global peers, with the forward price and return rate of the STOXX Europe 600 being 14 times higher than the 20 of the US S&P 500.
A hope for a higher valuation and better liquidity has driven an increase in asylum from the European index to the US, with the UK stock market struggling with its biggest escape since the financial crisis last year.
HSBC/New Financial Report found 70% below listing prices for 130 companies in the survey that moved to the US, including IPOs, primary list switching and similar transactions.
After a March FT analysis, it was shown that half of the companies that added the US list failed to record valuation ups, while most companies increased their stock liquidity.
The authors of the report urged UK and EU policymakers to push for reforms to make the public market more attractive.
The UK announced its biggest listing overhaul in decades last year, but the EU is about to set up a capital market union after former European Central Bank head Mario Draghi recommended completion in an influential report on the future of the region’s competitiveness.
Investors are also warning market volatility as Trump’s “liberation day” tariff blitz could encourage more private takeovers.
“If you have a soft equity market and a private equity context that has a lot of unadvanced capital, you’ll see a lot of public (around businesses) privately,” says Hamishmaia, head of private equity at Columbia Thread Needle Investments.
The market “can see more” private equity acquisitions, particularly now that certain companies have “refined” the process, he argued.
“Unless more companies come to them, “we will see that the open market will continue to shrink,” he added, “it is very, very difficult to do an IPO at this time.”
“A shortage of IPOs is not good for the stock market or for the stockholders,” he warned.
