Why Europe is having its mid-market moment

For years, large-cap US buyouts have dominated the attention of institutional investors. But in
2025, Europe’s mid-market is taking centre stage.

Recent data from Moonfare’s 2025 investor survey shows a clear shift: 43.7% of LPs now prefer Europe as an investment destination, compared to just 29.9% for the US.

Meanwhile, mid-market buyouts top the list of most attractive private equity strategies, preferred by over 51% of investors. This type of number shows a clear reshuffling of LP strategies.

What's driving the shift?

1. Liquidity pressure favours faster exits
With liquidity under strain and DPI (Distributed to Paid-In Capital) rising as a key LP metric, the mid-market's typically quicker deal cycles and broader exit options are more appealing than ever. Bain reports that 2018 vintage funds are lagging on distributions (0.6x DPI vs. 0.8x
historical averages), prompting LPs to seek GPs who can return capital faster.

2. Less leverage, more control
Mid-market deals often rely on operational improvement rather than excessive leverage, making them especially attractive in a high-interest-rate environment. This controlled risk profile is  resonating with LPs eager to avoid overexposure to large, debt-heavy structures.

3. Strong sector access
Moonfare’s data shows LPs favor sectors like technology (65.7%), defense (56.2%), and
healthcare/biotech (47.3%) – all of which are well-represented in the European mid-market.
Smaller funds with domain-specific focus are better positioned to access these verticals at
reasonable valuations.

4. Geopolitical diversification
Europe offers a relatively stable geopolitical environment compared to the US and certain
emerging markets. For LPs recalibrating exposure due to trade tensions or regional uncertainty,
Europe presents a less volatile landscape – especially when it comes to domestic-facing
mid-market strategies.

The rise of the spinout
Another factor fuelling this shift: the rise of emerging and spinout managers across Europe.
These new teams, often comprised of seasoned professionals leaving larger platforms, are
introducing institutional-quality operations, local sourcing advantages and agile strategies that directly address LP concerns. It's a compelling formula in a fundraising market where LPs have become highly selective.

As an emerging manager, what should you do now?

• Emphasize local access. LPs want boots-on-the-ground sourcing and insight. This is
  part of the European appeal.
• Sharpen your DPI story. Explain how your mid-market focus translates to faster,
  cleaner exits.
• Lean into thematic strength. If you’re in sectors like defence, healthcare or industrial
  tech, now is the time to highlight it.
• Show operational credibility. Emerging managers win by being clear and prepared.