PitchBook’s second quarter report on the U.S. private equity sector finds fundraising exceedingly robust, deal activity holding its own and exits continuing their slowdown.
Private equity fundraising in the first half mirrored that of the 2007 boom, and commitments in 2017 could be the highest of any year since then, according to the report.
Through the first half, $113 billion was committed to 117 funds. Ninety-three percent of funds hit or exceeded their funding target, thanks to larger commitments by limited partners.
The report said strong distributions in recent years and increased allocations from limited partners seeking higher returns were driving this trend.
The biggest funds, those with $5 billion or more, accounted for half of all capital raised in the first half. And even as fund targets increased, the average time to close decreased to 12.3 months for the overall industry and just 10.8 month for buyout funds.
PitchBook noted the pace of commitments could be expected to slow as distributions from general partners have begun to do. “However, we believe the fundraising craze is nowhere near the end as public pensions, among other LPs, face significant shortfalls.” Robust commitments should extend through year-end, it said.
A recent report on the global private equity industry also found that ravenous investors were driving fundraising.
According to PitchBook, deal flow in the second quarter was slightly below last year’s pace. Across the U.S., 866 deals were completed, with a total estimated value of $151 billion.
The report said private equity firms, brimming with some $546 billion in dry powder and helped by lower high-yield credit spreads, continued to deploy capital, notwithstanding high multiples and scarce quality targets.
U.S. mergers and acquisitions EBITDA (earnings before interest, tax, depreciation and amortization) multiples pulled back a bit in the first half, to 10.5x from 10.7x in 2016.