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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.

Investment Activity

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.

Increased competition from nontraditional investors also kept multiples high, the report said, noting that sovereign wealth funds and public pensions are increasingly bypassing the traditional fund structure and pursuing direct deals.

In 2019, nontraditional investors participated in only 12.3% of traditional private equity mega-deals, down from 24% in 2015.

The report said the high-multiple environment also drove many large-scale carveouts, a strategy some large public companies pursued to divest noncore assets and diminish their conglomerate discount.

The $13.2 billion Clarios carveout from Johnson Controls was the largest U.S.-based buyout in 2019. Europe, too, saw several carveouts, including that of of data provider Refinitiv from Thomson Reuters and subsequent sale to the London Stock Exchange.

Exits 

Private equity exit activity fell year over year in 2019, finishing with one of the lowest totals in the last six years. By year-end, 1,035 exits valued at $318.2 billion had taken place, representing declines of 16.5% and 28%.

Private-equity backed initial public offerings in 2019 mirrored the feeble IPO market in general, with only 23 exits, versus 46 in 2018. PitchBook predicted that private-equity backed IPOs would rise in 2020 as a large backlog of companies looks to go public.

Partial sales and secondary transactions experienced a dramatic uptick last year, according to the report, with the top decile holding times extending past a decade and limited partners looking for liquidity options.

PitchBook said the proliferation of long-dated funds and growing competition from nontraditional investors would likely increase holding periods over the long term and open up a new cohort of investable companies.