Private Equity Buyout Deal Flow Hits Post-Crisis Peak

Add-on deals made up 39% of all private-equity-backed deals in the first three months of the year—the first quarter in the 2006–2015 period in which the number of merger deals has surpassed the number of leveraged buyouts, according to Preqin.

“Private equity fund managers are evidently finding greater value in combining portfolio companies within certain sectors, particularly as the global economy begins to stabilize and competition intensifies within specific markets,” Christopher Elvin, Preqin’s head of private equity products, said in a statement.

The Heinz-Kraft merger had a huge effect on the breakdown of investments by sector, with food and agriculture representing 42% of the aggregate deal value in the first quarter, despite accounting for just 5% of all deals.

Fundraising Eases

Preqin said that the weak fund closure figure may increase by as much as 20% as more data flow in. The current figure of 151 closures compares with an average of 288 fund closures in each quarter of 2014.

The $94 billion secured by funds closed in Q1 was the lowest in two years.

Preqin said that although many investors sought to increase their allocations, the fundraising figures pointed to a continuing trend of investors concentrating their investments among fewer large firms.

Following are other Q1 fundraising facts:

• 50% of funds closed exceeded their fundraising target, and 24% more met their target, compared with 69% of funds closed in 2014 that met or exceeded their targets
• On top of the $94 billion raised by funds holding final closes, 130 funds holding interim closes raised a further $34 billion
• Private equity funds closed so far in 2015 took an average of 14.8 months to reach a final close, the shortest time since 2008 when the average was 14.5 months
• The average fund size for vehicles closed in Q1 was $573 million, up 20% from Q1 2014
• North America-focused funds attracted 67% of all capital raised in the first quarter of the year, while Europe-focused funds trailed at 19%
• Blackstone Real Estate Partners VIII, which raised $14.5bn in institutional capital, was the largest fund to close in Q1
• The number of funds in market dipped slightly from a high of 2,235 at the start of the year to 2,206 as of the end of March, suggesting that some managers may be delaying coming to market when faced with such intense competition.