Private equity-backed buyout deals totaled $89 billion in the second quarter, up significantly from the $50 billion in aggregate deal value recorded in the first quarter, according to Preqin, the alternatives data provider.
Preqin noted, however, that even though it expected this total to rise by 5% to 10% as more data become available, global deal value does not match the $102 billion seen in the 2015 second quarter.
Still, the 1,004 deals announced in the latest April-to-June period did exceed the 940 deals recorded in the previous three months, and represented the highest quarterly figure since Q4 2014.
The private equity buyout-backed exit market expanded in the second quarter, as 434 exits were announced globally, worth a combined $90 billion. This represented an 18% increase in the number of exits and a 33% increase in exit value from the previous quarter.
By comparison, in the same period last year, 453 exits were announced globally, worth a total $126 billion.
Deals and Exits
North America and Europe accounted for 89% of the deal flow in the second quarter, 534 and 356 deals, respectively. However, the $57 billion aggregate deal value for North America was more than double the $25 billion seen in Europe.
Leveraged buyouts represented 40% of deals in the second quarter, and 53% of aggregate deal value. Although the 16 public-to-private deals in the quarter accounted for just 2% of the number of deals, they represent 21% of total deal value.
Information technology deals made up 24% of aggregate deal value in Q1, down from 28% in Q1. Deals in the industrials sector represented 22% of the number of deals, but were worth just 9% of the aggregate value in the quarter.
Trade sales represented half the number of exits and 51% of the aggregate exit value in Q2. IPOs and private placements of buyout-backed companies tripled from low levels in the previous quarter.
The biggest buyout-backed deal in Q2 was also the largest exit: the $7.5 billion May sale of MultiPlan Inc. from investors Ardian, Partners Group and Starr Investment Holdings to a consortium of GIC, Hellman & Friedman and Leonard Green Partners.
“The first quarter of 2016 was a period of relatively low activity for the private equity buyout deals market, with both the number of deals globally and the aggregate deal value falling,” Preqin’s head of private equity products, Christopher Elvin, said in a statement.
The second quarter saw a significant uptick in overall deal value, Elvin said, “a sign that managers are returning to the levels of pricing and competition seen through much of 2015.”
The buyout-backed exit environment also is beginning to approach the levels seen throughout 2015, he said.
“IPOs and private placements saw particular growth over the quarter, with the number of exits tripling and the aggregate value increasing significantly; nonetheless this exit type still accounts for less than a quarter of the total exit environment.”
The private equity fundraising market accelerated in the second quarter, as 180 funds closed securing a combined $101 billion.
Preqin said that given an expected rise in these figures by 10% to 15% as more information becomes available, the aggregate capital secured by funds closed in the quarter could approach the record $112 billion recorded in Q4 2013.
However, the number of funds closed fell short of the 261 funds that closed in the same period last year.
North America-focused funds drove growth in the second quarter, as 96 funds raised $60 billion, accounting for 59% of the aggregate capital raised globally.
By contrast, Europe saw 44 funds raise just $33 billion in Q2. Elsewhere, 33 Asia-focused funds raised $6 billion through the quarter, while seven funds focused on the rest of world raised $1.3 billion.
Preqin reported that 54% of private equity funds closed in the first half did so above their target size, a record. Just 21% of funds closed below their target size, down from 28% of funds that failed to meet their target in 2015.
Dry powder, the level of uncalled capital available to fund managers of core private equity strategies, hit new record highs, rising from $745 billion at the end of 2015 to $818 billion as of the end of June.
As of the start of July, 1,720 private equity funds were in market worldwide, targeting an aggregate $447 billion, compared with 1,630 funds that were seeking $488 billion at the beginning of the year.
This was the first reduction in aggregate target capital since the start of 2014, according to Preqin.
Elvin said robust fundraising activity in the first half highlighted the continuing trend of increased amounts of capital being allocated to a smaller number of experienced fund managers.
“Global uncertainties surrounding the U.S. presidential election and the British EU referendum have continued to cast a shadow over the industry,” he said. “While North America-focused fundraising has been robust, Europe seems to be experiencing a more cautious environment.
“With volatility persisting in the wake of Britain’s EU referendum result, we can expect further uncertainty to affect the European fundraising market.”