Breakdown 4Q The Private Equity. Total Private Equity Deal Flow

Transcription

1 The Private Equity Breakdown 4Q 20 U.S. private equity activity continues to build with 31 completed investments totaling $2 billion, completed exits for an aggregate $1. billion, and 1 closed PE funds raising a combined $2 billion during the third quarter. Each of those totals represents an increase from 3Q 200, which now appears to have been the very beginning of the recovery for private equity. The positive trends that first began to develop a year ago continue to strengthen and spur on increasing private equity activity. Among those trends is the increased availability of debt financing, rising company valuations, and a recovery in the general economy and company performance. While 3Q was the slowest quarter this year, it was only slightly so, and, considering that there are an additional 200 private equity deals currently announced and still pending, the second half of 20 is shaping up to be as strong as, if not stronger than, the first half of the year. The middle market ($0 million-$1 billion) continues to drive private equity investment, accounting for 0% of the capital invested by PE firms so far in 20. Although, with the increasing availability of debt and an appetite for larger deals returning, the volume of large deals is creeping back up. In fact, more deals above $1 billion have been completed so far in 20 than in all of 200. A number of challenges remain for the private equity industry though, including aging portfolios, fundraising difficulties, and uncertain regulatory and economic environments. Liquidity especially continues to be a concern, but the recent upswing in valuations has lead to increased exit activity as PE firms take advantage of current opportunities to exit aging portfolio companies at strong multiples. Fundraising is still difficult and has yet to clearly turn a corner, but, as investment and exits continue to rise, fundraising is likely to increase as well. With three quarters now in the books, 20 is shaping up to be better than 200 in almost all aspects and is putting the industry back on solid footing for the upcoming new year. Total Private Equity Deal Flow The number of deals in 3Q 20 increased slightly to 31 from 30 in 3Q 200. The $2 billion of capital invested in 3Q 20 represented a 1% increase from the $11. billion in 3Q 200. The deal flow level seen in the first three quarters of 20 constitutes an % increase over the same time period in 200, putting this year on pace to finish with over 1,000 deals. [ 1 ]

2 PE Transactions by Industry Sector In 3Q 20 PE Transactions by Region In 3Q 20 Business Products & Services (B2B) continues to represent the largest portion of PE deal flow (3%). During 3Q 20, investors shifted more attention to the Business Products and Services, Information Technology, and Materials and Resources sectors at the expensive of Consumer Products and Services, Energy, Financial Services, and Healthcare. Investment activity continues to be dispersed throughout the United States. The South has increased its share of deal flow by 2% from 2Q 20, while the West Coast saw a decrease of %. The South represented 1% of all deals in the United States in 3Q 20, an increase of 3% from last quarter. The coastal regions accounted for over half of the deal flow during 3Q 20 with 1 deals. Percent of PE Transactions (Count) by Deal Size Percent of PE Investment (Total $ Amount) by Deal Size Deals between $0 million and $20 million have held relatively steady over the trailing four quarters, finishing even with 3Q 200 s total of 3 deals. This group accounted for 3% of all deals in the first three quarters of 20 and is at a seven-year high in terms of its share of overall deal flow. While deals between $20 million and $1 billion are beginning to gain momentum, deal activity under $0 million appears unlikely to top 200 totals. The middle market ($0 million - $2. billion) continues to represent the majority of PE investments, accounting for $3 billion of the $ billion invested so far this year. Deals between $1 billion and $2. billion saw a 33.% increase this quarter from the second quarter of 20, with deals completed for a total of $. billion. [ 2 ] * Through ³Q ²⁰¹⁰

3 Private Equity Exits Heading in the Right Direction Exit volume continues to build for private equity investors with exits completed in the third quarter, representing a % increase from 3Q 200. The total to date in 20 now stands at 2 completed exits, which is more than all of 200 and puts 20 on pace to top 200 s total of 30 exits. The third quarter s exit volume was composed of 1 sales to strategic acquirers, 2 sales to other PE firms (secondary sales) and IPOs. This is close to the long-term averages for exit types with strategic sales making up 3%, secondary sales 2% and IPOs %. Exit volume will likely continue to grow as PE firms look to work through a backlog of aging portfolio investments, return capital to their investors in advance of upcoming fundraising efforts, and take advantage of the recent rise in company valuations. Median Exit Size ($M) Average Time to Exit The median deal amounts for private equity-backed companies sold to secondary PE buyers and corporate acquirers have climbed considerably in 20 to near all-time highs. The median secondary sale through the first three quarters of 20 is $24 million, and for sales to corporate acquirers it stands at $200 million. The median secondary sale amount has increased rapidly through 20 with a 1Q median of $ million and the 3Q median reaching $2 million. The effects of the recession on exits can be seen in the increased hold times of portfolio investments by PE firms. This chart shows the average time from buyout to exit based on the year of exit. During 200 and 20, PE firms were exiting investments they had held for an average of nearly years, versus previous years when the average hold time was closer to 4 years. [ 3 ] * Through ³Q ²⁰¹⁰

4 The State of Private Equity Fundraising After three straight quarters of expansion, the U.S. private equity fundraising market appears to have leveled off. During 3Q 20, a total of 1 U.S. PE funds (buyout, distressed, growth, and mezzanine) held final closes on a total of $20 billion. While this does represent a decrease from the second quarter, there are a number of promising signs emerging. When compared to the same time period in 200, the activity in 3Q 20 represents a 33% increase in the number of funds closed. Additionally, the median fund size increased from $3 million in 200 to $0 million so far in 20. Fundraising by larger funds, those between $1 billion and $ billion, has maintained momentum so far in 20, closing funds for a total of $1 billion in the third quarter. According to a recent PitchBook report, the private equity industry has roughly $4 billion in unspent capital sitting on the sidelines. Unless deal activity increases significantly in the near term, new fundraising will remain slow as investors work through their remaining dry powder. Fundr aising Activity The third quarter of 20 saw 1 funds close, a 33% increase from 3Q 200. The number of funds raised through 3Q 20 declined by 1% from the 4 funds raised through 3Q 200. Total capital raised through 3Q 20 declined by 0% from the $121 billion raised through 3Q 200. Largest Funds Closed Through 3Q 20 Firm Fund Morgan Stanley Real Estate Morgan Stanley Real Estate Fund VII Global Oaktree Capital Management OCM Opportunities Fund VIII Energy Capital Partners Energy Capital Partners II Madison Dearborn Partners Madison Dearborn Capital Partners VI Alinda Capital Partners Alinda Infrastructure Fund II Oaktree Capital Management OCM Principal Opportunities Fund V The Blackstone Group Blackstone/GSO Capital Solutions Fund The Carlyle Group Carlyle Asia Partners III New Enterprise Associates New Enterprise Associates 13 Landmark Partners Landmark Equity Partners XIV Apollo Global Management Apollo European Principal Finance Fund Starwood Capital Group Starwood Global Opportunity Fund VIII Avista Capital Partners Avista Capital Partners II Southern Cross Southern Cross Latin America PE Fund IV Advent International Advent Latin America Private Equity Fund V Adams Street Partners Adams Street Partners 20 Glbl. Offering Program Veritas Capital Veritas Capital Fund IV Angelo Gordon & Company AG Capital Recovery Partners VII The Carlyle Group Carlyle Global Financial Services Partners Bayside Capital H.I.G. Bayside Loan Opportunity Fund II Size ($M) 4,00 4,400 4,33 4,0 4,000 3,300 3,20 2,0 2,00 1,30 1,1 1,30 1,00 1,0 1,0 1,300 1,22 1,200 1,0 1,0 Fund Count by Fund Size Capital R aised by Fund Size The number of funds closed in 3Q 20 between $1 billion and $ billion remains even with 3Q 200. The proportion of funds closed between $0 million to $20 million continues to shrink and is at its lowest level since Funds over $00 million continue to increase, now accounting for almost % of all PE funds raised in [ 4 ] More than 0% of the total capital raised by U.S. PE firms through the third quarter of 20 was by funds in the $1 billion to $ billion size range. Total capital raised by funds $00 million and below so far in 20 is $ billion. For funds above $00 million, the total stands at $4 billion. * Through ³Q ²⁰¹⁰

5 Most Active Private Equity Investors Through 3Q 20 By Number of Investments Investor Name Deal Count The Blackstone Group 22 Golden Gate Capital 12 The Carlyle Group 12 Thoma Bravo 12 H.I.G. Capital 11 Apollo Global Management Sun Capital Partners TPG Capital Warburg Pincus Metalmark Capital Stone Point Capital The Gores Group Wind Point Partners Kayne Anderson Capital Advisors Lightyear Capital Platinum Equity Silverhawk Capital Partners Catterton Partners GTCR Golder Rauner Marlin Equity Partners Riverstone Holdings Summit Partners The Riverside Company Ares Management BlackEagle Partners CCMP Capital Advisors Court Square Capital Partners Great Hill Partners GS Capital Partners Kohlberg & Company Leonard Green & Partners Morgenthaler Partners AEA Investors American Industrial Partners Arsenal Capital Partners Audax Group Aurora Capital Group Bain Capital Baird Capital Partners Blackstreet Capital Management Brazos Private Equity Partners Francisco Partners General Atlantic Harvest Partners Hellman & Friedman Kohlberg Kravis Roberts Oaktree Capital Management Parthenon Capital Partners Pine Brook Road Partners Quad-C Management Ridgemont Equity Partners Silver Lake Partners Spire Capital Partners Thomas H. Lee Partners Thompson Street Capital Partners Veronis Suhler Stevenson Welsh Carson Anderson & Stowe [ ] Most Active Private Equity Service Providers Through 3Q 20 By Number of Deals Serviced Top Law Firms in Private Equity 1 Kirkland & Ellis Jones Day Weil Gotshal & Manges Latham & Watkins Morgan Lewis & Bockius Skadden Arps Slate Meagher & Flom Sullivan & Cromwell Simpson Thacher & Bartlett Paul Weiss Rifkind Wharton & Garrison Gibson Dunn & Crutcher Ropes & Gray White & Case 1 by counsel provided on transactions Top Investment Banks & Advisors 2 Harris Williams & Co. BofA Merrill Lynch Goldman Sachs Jefferies & Company Imperial Capital Lincoln International JP Morgan Moelis & Company Robert W Baird Houlihan Lokey Howard & Zukin Lazard Morgan Stanley 2 by number of advisory roles in transactions Top Lenders in Private Equity 3 GE Capital Madison Capital Funding Wells Fargo Fifth Third Bank Golub Capital Ares Capital Bank of America Goldman Sachs PNC Financial Services Group 3 by number of financings provided COPYRIGHT 20 PitchBook Data, Inc. All rights reserved. No part of this publication may be reproduced in any form or by any means graphic, electronic or mechanical, including photocopying, recording, taping and information storage and retrieval systems without the express written permission of PitchBook Data, Inc. Contents are based on information from sources believed to be reliable, but accuracy and completeness cannot be guaranteed. Nothing herein should be construed as any past, current or future recommendation to buy or sell any security, an offer to sell, or a solicitation of an offer to buy any security. This material does not purport to contain all of the information that a prospective investor may wish to consider and is not to be relied upon as such or used in substitution for the exercise of independent judgment

6 Your Single Source for Quality Private Equity Data Only PitchBook tracks the entire private equity lifecycle and every party involved: limited partners, inancial sponsors and investors, target companies, service providers and key professionals. By dynamically linking these parties, PitchBook makes it easy to identify relationships and networks. Additionally, it actively researches target companies the entire time they are in an investor s portfolio, so you ll always be up-to-date on the crucial details of a transaction and the company s progress. Broadest Private Equity Coverage The PitchBook Platform contains information on over 2,000 private equitybacked companies, investors and service providers, across every industry segment, every deal size and every private equity deal type from announcement to exit. Deepest Level of Detail PitchBook s mission is to provide hard-to- ind information on private equity: the details you can only ind through direct contact with key players and painstaking background research. PitchBook researches deal amounts and valuations, target company inancials and price multiples, capitalization structures, deal terms, investor information and service provider contact information. It also tracks deal stakeholders and participants not just inancial sponsors and investors, but also the many other inancial, legal and advisory irms associated with taking a deal through to completion. What Makes PitchBook Different Deal monitoring and research through the entire lifecycle. Without exception, PitchBook actively researches and reports on companies from announcement to inal exit. PitchBook captures the full inancing story, much more than just a snapshot of the deal s announcement. Full spectrum coverage. PitchBook covers the full spectrum of private equity deals: all sizes, all industries and all types. No shortcuts. It takes meticulous research to produce complete, consistent, timely and accurate information, and we devote the manpower and resources necessary to make this happen. The PitchBook Platform Places Powerful Intelligence at Your Fingertips: Request a Demo Detailed Reports Customizable Dashboard Excel Downloads Sortable Results Advanced Searches* *Advanced Searches allow selecting criteria from more than 130 search options Visit us at [ ]