Private Equity: Data News Analysis The Private ... -...
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1-877-267-5593 [email protected] www.pitchbook.com [ 1 ] Private Equity: Data | News | Analysis Breakdown 2Q 2011 Total Private Equity Deal Flow The $28 billion of invested capital was the third-highest quarterly total since 3Q 2008. The 1Q count of 377 deals is in line with the trailing two-year average quarterly deal flow of 380. 1Q 2011 and 4Q 2010 combined have been the best six months for PE deal flow and investment since 2H 2008. U.S. private equity acvity during the first quarter of 2011 remained steady with 377 completed PE deals involving $28 billion of invested capital, 83 exits totaling $24.4 billion and 30 closed PE funds raising $25.3 billion in commitments. Deal acvity dipped from 4Q 2010 due to the push in deals that occurred in response to the year-end tax law deadline (which was eventually pushed back), clearing out a large inventory of PE deals that were in the works. Compared to 3Q 2010, the first quarter was largely flat, a posive sign that private equity deal flow in 2011 will be similar to last year’s levels or could possibly climb in the second half of the year. The middle market connues to be the driver behind private equity acvity, accounng for over 53% of deal acvity in the first quarter of 2011. Most of these companies received their first outside instuonal investment as their owners looked to private equity investors for growth capital, liquidity and operaonal experience. There were a number of bright spots and interesng trends that emerged during the quarter that will be worth keeping an eye on over the next few quarters. One of the most significant was the return of available financing for mega-deals and thus a return of those mul-billion dollar transacons. There were four deals over $2.5 billion during the first quarter, surpassing 2009’s total and pung 2011 on track to double 2010’s total of eight. A trend that has been ongoing over the last few quarters and connued through the first quarter was the increase in the size of exits, especially in PE-to-PE sales. A third bright spot was private equity fundraising, which, with $25 billion raised and funds again surpassing their targets by significant amounts, is showing new signs of life. Look for the rest of the year to build upon this solid foundaon as PE firms put their $490 billion of available capital to work, hunt for exit opportunies for the esmated inventory of 4,000 mature PE investments and begin fundraising again. The Private Equity Source: PitchBook New! Exclusive to PitchBook Users Look for the “Click to Customize” buttons next to every graph to go directly to PitchBook’s new charting feature, where you can customize the graphs to match your focus and space. Click to Customize (Login Required)
Transcript of Private Equity: Data News Analysis The Private ... -...
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Private Equity: Data | News | Analysis
Breakdown 2Q 2011
Total Private Equity Deal Flow
The $28 billion of invested capital was the third-highest quarterly total since 3Q 2008.The 1Q count of 377 deals is in line with the trailing two-year average quarterly deal flow of 380.1Q 2011 and 4Q 2010 combined have been the best six months for PE deal flow and investment since 2H 2008.
U.S. private equity activity during the first quarter of 2011 remained steady with 377 completed PE deals involving $28 billion of invested capital, 83 exits totaling $24.4 billion and 30 closed PE funds raising $25.3 billion in commitments. Deal activity dipped from 4Q 2010 due to the push in deals that occurred in response to the year-end tax law deadline (which was eventually pushed back), clearing out a large inventory of PE deals that were in the works. Compared to 3Q 2010, the first quarter was largely flat, a positive sign that private equity deal flow in 2011 will be similar to last year’s levels or could possibly climb in the second half of the year. The middle market continues to be the driver behind private equity activity, accounting for over 53% of deal activity in the first quarter of 2011. Most of these companies received their first outside institutional investment as their owners looked to private equity investors for growth capital, liquidity and operational experience.
There were a number of bright spots and interesting trends that emerged during the quarter that will be worth keeping an eye on over the next few quarters. One of the most significant was the return of available financing for mega-deals and thus a return of those multi-billion dollar transactions. There were four deals over $2.5 billion during the first quarter, surpassing 2009’s total and putting 2011 on track to double 2010’s total of eight. A trend that has been ongoing over the last few quarters and continued through the first quarter was the increase in the size of exits, especially in PE-to-PE sales. A third bright spot was private equity fundraising, which, with $25 billion raised and funds again surpassing their targets by significant amounts, is showing new signs of life. Look for the rest of the year to build upon this solid foundation as PE firms put their $490 billion of available capital to work, hunt for exit opportunities for the estimated inventory of 4,000 mature PE investments and begin fundraising again.
The Private Equity
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The inner ring shows the industry breakdown of PE deals for 1Q 2010, the outer ring for 1Q 2011. The biggest change versus last year was the increase in Consumer Products and Services activity, led by popular sectors such as Consumer Non-Durables, which received increasing interest over the last year. The Business Products and Services industry continues to be the most active, accounting for almost a third of all deals. The Healthcare, Information Technology and Financial Services industries round out the top five.
The inner ring shows the geographic breakdown of PE deals for 1Q 2010, the outer ring for 1Q 2011. There has been a shift in the geography of private equity investment over the last year with the Midwest and the South seeing more PE deals, 89 and 65 in 1Q 2011 respectively. Meanwhile, the Southeast and Mountain regions have been seeing less private equity activity.
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PE Transactions by Industry Sector In 1Q 2011
PE Transactions by Region In 1Q 2011
Percent of PE Transactions (Count) by Deal Size
The broader middle market ($50 million to $1 billion) continues to account for over 53% of private equity deals. Deals $50 million to $250 million increased their share of deal flow to 37% during the quarter, well above the 5-year average of 32%. With four deals over $2.5 billion in the first quarter, the share of deal flow for mega-deals climbed to nearly 5%, well above what it has been for the past couple of years.
Private equity firms took advantage of available debt financing for large deals during the first quarter to close six over $1 billion in size, totaling $16.5 billion. These deals accounted for over 60% of the capital that PE firms invested during the quarter, on par with 2008 levels. Deals over $500 million continue to account for over 70% of the total PE capital invested as these larger deals outweigh the more numerous but smaller deals under $500 million.
Percent of PE Investment (Total $ Amount) by Deal Size
*Through ¹Q ²⁰¹¹
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With 83 exits during the quarter, private equity exit activity was similar to the first quarter of 2010. Analogous to deal flow, the drop from 4Q 2010 was more a result of the tax-motivated push for exits during 4Q than a sudden weakness in exit opportunities during the first quarter. The mix of exit types in 1Q 2011 was in line with historic averages, consisting of 60% sales to corporations, 30% sales to other PE firms (Secondary Buyouts) and 10% IPOs. The good news for PE investors is that the median exit deal size remains relatively high with $142 million for corporate acquisitions and $463 million for secondary buyouts. Private equity firms are patient long-term investors, but, with over 4,000 aging portfolio company investments, limited partners waiting for distributions in advance of future fundraising and the improved economic climate, exit activity will have to begin to increase soon.
Exits Slow After Record Quarter
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Fundraising Activity
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The first quarter breakdown of fundraising by fund size shows a continuation of 2010’s trend toward middle market-focused funds, which raised 30% of the new PE capital in 1Q 2011. Based on the pattern shown to date, 2011 is on pace to exceed 2010’s $90.8 billion of capital raised by 9%.
The first quarter of 2011 represents the fifth straight quarter without a closed fund over $5 billion, and, in the absence of mega-funds, middle-market funds represented 70% of newly closed PE funds in 1Q 2011. Based on activity so far this year, 2011 is on pace to exceed 2010 by 20% in terms of the number of PE funds closed.
The State of Private Equity Fundraising The first quarter of 2011 finished with 30 closed private equity funds, increasing nearly 43% from the previous quarter, which continues an uptrend started in September 2010 and mirrors a similar trend in late 2009. Activity in the first quarter saw a sharp rise in the proportion of funds raised between $500 million and $1 billion to 32% of all fund closes in the quarter, compared to its historical average of 19.5%. Funds $1 billion to $5 billion remained steady at 27%, and there were no funds above $5 billion that held final closes during the quarter.
For those funds that did close, the final fund size averaged 17% above the target amount, a level of oversubscription equivalent to 2007 levels. The ratio of fund size to target rose for the second straight year after nearly two years of activity where funds closed at or near target. Even with this uptrend, however, the industry’s fundraising activity remains collared by nearly $490 billion of unspent capital on the sidelines. Look to the second quarter of 2011 for hints on whether PE fundraising will remain range-bound or shift into a new gear.
Largest Funds Closed 1Q 2011 Firm
Stone Point CapitalEnCap InvestmentsGTCR Golder RaunerBaring Private Equity AsiaThe Gores GroupFrancisco PartnersFrontPoint PartnersMorgan Stanley Private EquityMerit Energy Co.Energy Spectrum CapitalCortec GroupWynnchurch Capital PartnersJuggernaut Capital PartnersEBF & AssociatesPantheon VenturesRockland CapitalCastle Creek CapitalPrairie CapitalLevine Leichtman Capital PartnersBunker Hill Capital
3,5003,5003,2502,4602,0642,0001,000
956912755620603568567400333331300225200
FundTrident VEnCap Energy Capital Fund VIIIGTCR XBaring Asia Private Equity Fund VGores Capital Partners IIIFrancisco Partners IIIFrontPoint-SJC Direct Lending FundMorgan Stanley Credit PartnersMerit Energy Partners HEnergy Spectrum Partners VICortec Group Fund VWynnchurch Capital Partners IIIJuggernaut FundMerced Partners IIIPantheon Global Infrastructure FundRockland Power PartnersCastle Creek Capital Partners IVPrairie Capital VLevine Leichtman Capital Partners SBIC FundBunker Hill Capital II
Size ($M)
*Through ¹Q ²⁰¹¹
The number of funds raised in 1Q 2011 increased 43% from 21 funds closed in 4Q 2010, the second straight quarterly increase of over 40%.Total capital raised in 1Q 2011 increased 142% over the $10 billion raised in 4Q 2010, and declined 11% from the $29 billion raised in 1Q 2010.The average fund size for 1Q funds of $840 million is very close to the five-year average of $870 million.
Fund Count by Fund Size Capital Raised by Fund Size
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Private Equity: Data | News | Analysis
By Number of Investments
Most Active Private EquityInvestors 2Q 2010 - 1Q 2011
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Deal Count302221171616141414131313131212121211111010101010
9999998888888887777777777777777
2 by number of advisory roles in transactions
Top Investment Banks & Advisors2
Bank of America Merrill LynchGoldman SachsHarris Williams & Co.West Monroe PartnersMorgan StanleyJP MorganLincoln InternationalHoulihan Lokey Howard & ZukinJefferies & CompanyMcColl PartnersMoelis & CompanyLazard
Source: PitchBook3 by number of financings provided
Top Lenders in Private Equity3
Bank of America Merrill LynchGE CapitalWells FargoJP MorganChurchill Financial Middle Market FinanceFifth Third BankU.S. BancorpMadison Capital FundingPNC Financial Services GroupFifth Street FinanceTriangle CapitalProspect Capital
1 by counsel provided on transactions
Top Law Firms in Private Equity1
Kirkland & EllisJones DayWeil Gotshal & MangesLatham & WatkinsSkadden Arps Slate Meagher & FlomSimpson Thacher & BartlettDechertSullivan & CromwellPaul Weiss Rifkind Wharton & GarrisonRopes & GrayGibson Dunn & CrutcherGoodwin Procter
Most Active Private Equity ServiceProviders 2Q 2010 - 1Q 2011By Number of Deals Serviced
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Investor NameThe Blackstone GroupH.I.G. CapitalThe Carlyle GroupTPG CapitalSun Capital PartnersThe Riverside CompanyApollo Global ManagementGTCR Golder RaunerWarburg PincusGolden Gate CapitalGS Capital PartnersKayne Anderson Capital AdvisorsPlatinum EquityKohlberg Kravis RobertsThe Gores GroupThoma BravoWind Point PartnersHarbourVest PartnersOaktree Capital ManagementKohlberg & CompanyLeonard Green & PartnersMetalmark CapitalRiverstone HoldingsStone Point CapitalABRY PartnersBain CapitalIrving Place CapitalLLR PartnersMarlin Equity PartnersOak Hill Capital PartnersAmerican Securities Capital PartnersAudax GroupBerkshire PartnersBush O'DonnellCatterton PartnersLaSalle Capital GroupProvidence Equity PartnersQuad-C ManagementSilverhawk Capital PartnersCapitalSouth PartnersCenterbridge PartnersCourt Square Capital PartnersCrestview PartnersFriedman Fleischer & LoweHarvest PartnersHellman & FriedmanHuntsman Gay Global CapitalKRG Capital PartnersOdyssey Investment PartnersRiverside PartnersTA AssociatesThomas H. Lee PartnersTriangle CapitalVeritas CapitalWelsh Carson Anderson & Stowe
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