[Edaily Marketin Soyoung Park Reporter] Global asset managers are turning their attention back to Europe. This shift is based on the assessment that valuations are lower compared to the U.S., and that deep-tech companies have greater room for growth as governments across Europe accelerate efforts to foster strategic industries. Analysts suggest that this trend could present new opportunities for South Korea as well. European deep-tech companies need partners for manufacturing, mass production, and commercialization, while South Korean companies can leverage Europe’s core technologies and global networks. Consequently, there is speculation that cross-border mergers and acquisitions (M&A) and investments linking Europe and South Korea could expand.

According to the global investment banking (IB) industry on the 8th, global capital is flowing into Europe’s M&A and growth capital markets. This is due to their high attractiveness in terms of pricing. Global asset manager Schroders assessed that the European small- and mid-cap buyout market is particularly attractive. It also noted that companies can be acquired at lower prices in specific transaction types, such as carve-outs.

Specifically, Schroders calculated that the median price-to-earnings ratio (EV/EBITDA) for private equity-led transactions in Europe is approximately 11.2x. This is lower than the 12.8x seen in U.S. buyout transactions. Furthermore, carve-out deals were closed at levels as low as 7 times earnings before interest, taxes, depreciation, and amortization (EBITDA). Secondary buyouts traded at around 13 times EBITDA. This indicates that even within the European market, entry prices vary significantly depending on the transaction type and sourcing capabilities. This suggests that global asset managers can find opportunities to invest locally at relatively favorable prices.

In line with this, Roland Berger, Europe’s largest consulting firm, also forecast a recovery in the European private equity market this year. In particular, it cited △improved debt financing conditions, △restored price visibility, and △a pipeline of pending exits (capital recovery) as key factors driving the resumption of transactions this year.

A senior official at a European private equity (PEF) firm operating in Korea described the current sentiment, stating, “The U.S. market is burdensome due to high valuations, and intense competition makes deal sourcing challenging.” He added, “Global asset managers are viewing Europe as an alternative and re-entering the market, with a particular focus on the UK and France.” In fact, foreign media outlets such as Reuters have reported that competition among foreign companies to acquire local firms in the UK M&A market is fierce this year. The relatively low valuations on the UK stock market are a major factor behind this trend.

In addition, industry insiders viewed the European market as a suitable alternative investment destination, noting that it possesses a strong foundation in strategic industries such as artificial intelligence (AI), semiconductors, quantum technology, energy, and defense. They also suggested that this trend could present an opportunity for South Korea. European deep-tech companies require South Korea’s manufacturing and commercialization capabilities. Furthermore, using South Korea as a base is ideal for expanding access to Asian markets.

Moreover, the South Korean government is fostering an environment to expand cooperation with Europe in high-tech industries. Cooperation between South Korea and the European Union (EU) is interlocking, centered on semiconductors, defense, and supply chains. Recently, the Office of the President announced that, following the South Korea-EU summit, the need for joint research combining South Korea’s semiconductor manufacturing capabilities with Europe’s strengths in equipment and research and development (R&D) was raised. Relations with France were also elevated to the level of “global strategic partners” following President Macron’s visit to South Korea. The two countries agreed to expand cooperation in cutting-edge strategic industries.

An official from the investment banking industry stated, “We anticipate an increase in opportunities for joint investments, strategic partnerships, the establishment of joint ventures (JVs), and cross-border M&A transactions that connect European deep-tech companies with Korea’s manufacturing and commercialization capabilities,” adding, “To commemorate the 140th anniversary of diplomatic relations between Korea and France this year, events are being planned for representatives from the capital markets of both countries to strengthen their networks.”