Private equity fundraising in the U.S. hit an all-time high of $301.3 billion in 2019, a year-over-year increase of 52.3%, across 202 funds, a decrease of 5.6%, according to PitchBook’s annual U.S. private equity breakdown released Friday.
U.S. private equity investment activity totaled $678 billion across 5,133 deals by year-end 2019, compared with $730.3 billion across 5,345 deals in 2018.
“Record-high fundraising numbers in 2019 coupled with recessionary fears will create an interesting dichotomy in the coming year,” Wylie Fernyhough, senior private equity analyst at PitchBook, said in a statement. “PE firms with recently raised capital from a record fundraising year will likely feel pressured to buy.”
Fernyhough noted, however, “we are seeing some peak-like indicators, including the rumored and audacious $70 billion+ potential buyout of Walgreens, and hearing PE firms are cautiously preparing for a recession during their holding time.”
After a lull in 2018, funds $5 billion and larger accounted for the highest proportion of capital raised since 2007: 53.8% of total capital raised in 2019. Fifteen mega-funds closed a total of $162.2 billion, including the record-breaking $26 billion Blackstone Capital Partners VIII fund.
Tech-focused private equity funds — a growing trend in the industry, according to PitchBook — also enjoyed a record-setting fundraising year.
According to the report, attractive performance accounts for the trend with tech-focused funds realizing an 18.9% internal rate of return over a 10-year horizon. This is nearly five percentage points higher than that for non-tech private equity buyouts and nearly double that for non-tech growth funds.
PitchBook reported that private equity dealmakers continued to pay elevated prices despite ongoing recession fears, with median buyout enterprise value/EBITDA multiples remaining relatively unchanged in 2019, falling from 11.5x in 2018 to 10.9x last year.
It ascribed these conflicting actions to pressure to invest newly raised capital, the uptick in larger deal sizes and growing interest in technology companies, which tend to have higher multiples.