Private equity celebrates $3.2trn in disclosed deal value in Berlin

Bain & Company found that the global private equity market capped off its best six-year stretch on record in 2019, according to the firm’s 11th annual report on the industry. The survey results were announced at the Super Return International conference this week in Berlin. Informa’s annual event boasts more than 1,300 general partners and almost just as many limited partners at what the company calls the world’s largest private equity and venture capital event. Speakers this year included Blackstone founder Stephen A. Schwarzman and The Carlyle Group’s David Rubenstein. Not only attracting conference crowds, the private equity investment market recorded an historic $3.2 trillion in disclosed buyout deal value last year with buyout firms attracting a record amount of capital and increasing their share to 40% of the total private capital market – the highest on record since 2006, according to world renown management consultancy Bain & Company. Officials at the Boston-based firm say though that a crowded marketplace pushed asset valuation to new heights with a total of new record of cash pouring into the industry, hitting a new record of $2.5 trillion for private capital. The valuation conundrum and the growing interest in co-investments has meant that private equity firms have had to find other sources of value creation beyond increased multiples. "Private equity investors had another strong year but they had to work harder than ever for their deals to be successful," said Hugh MacArthur, global head of Bain & Company's Private Equity practice. "Our research highlights a notable development in the US buyout market. For the first time, the returns of public markets and private equity have converged over a 10-year period. This raises questions about how private equity can stand out and remain attractive to investors going forward." According to Bain & Company’s analysis deal value last year was on par with historical averages of $551 billion, with a deal count being flat at roughly 3,600. Public-to-private transactions hit their highest levels since 2007 and eight of the top 10 buyouts involved public companies taken private in 2019. While competition was fierce for deals, distributions to investors was only slightly lower while exit count dipped to its lowest level since 2012. Fundraising ramped up last year, though through fewer funds, according to the report. Investors poured $894 billion into private capital, including private equity, real estate, infrastructure and natural resources. Buyouts alone raised $361 billion – a record-breaking sum. Overall investors have flooded $2 trillion into buyout founds over the past decade due to their enticing returns relative to public equities, according to Bain & Company. The firm in partnership with Professor Josh Lerner of Harvard Business School, as well as State Street Global Markets and State Street Private Equity Index, analyzed what was driving returns in both markets. What they found suggests that competition from public markets (which matched the returns of U.S. buyout funds in 2009 at 15%) is not likely to persist. Yet what are the factors creating performance in buyout funds, which have been popular among institutional investors? The experts say that the firms that are the most successful tend to fall into four categories: sector specialists, firms with focused hunting grounds, differentiated playbook funds relying on pattern recognition, funds that rely on scale and broad expertise.

Private equity celebrates $3.2trn in disclosed deal value in Berlin

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