Q2 2013 Private Equity Industry Trends

August 13, 2013 12:17 by Clayton Reeves in Capital Markets, Healthcare, M&A, Private Equity  //  Tags: , , ,   //   Comments (0)
McGladrey and PitchBook have reported private equity activity broken down into four sectors: business products & services, consumer products, health care and information technology. B2B: This industry continued to slow down in Q2 2013, with only 95 PE deals completed, totaling $11.0 billion. To put this into perspective, these are some of the lowest numbers in the last decade. Consumer Products: Continuing the trend from B2B, consumer products also slowed to the pace of frozen molasses, with PE completing just 64 deals during Q2.  Again, for perspective, this is the lowest quarterly total in more than a decade. Like other parts of the M&A market, the dollar amount ($31.2 billion) doesn't look too bad until you take out the megadeal for Heinz ($23.2 billion). Health Care: In an industry that has been expected to provide high deal flow, health care failed to live up to the hype.  PE managed only $4.1 billion of investment across 37 transactions. This proved to be the slowest quarter for deal flow since Q3 2009. Information Technology: Breaking the negative trend in PE activity, IT saw an increase in deals from Q1. Private equity invested $12.5 billion across 65 deals in Q2, which is similar to quarterly activity for the last couple years. So, what do these trends indicate for the broader M&A market?  It means that while PE still has considerable dry powder, this remains a seller's market.  Quality companies with earnings growth are hard to find, and when they decide to sell they are able to demand a high multiple.  So far, buyers have been patient, but eventually someone will have to flinch.  Either sellers will need to lower price expectations, or buyers will need to increase their price expectations for high quality targets.  If this doesn't happen, expect continued sluggishness. Click here to read the industry reports.

The Rise of Private Public Partnerships

July 18, 2013 14:53 by Bill Conway in Capital Markets, Economy, Energy, M&A, Natural Gas, Private Equity, Regulation, Telecom, Utilities, Water  //  Tags:   //   Comments (0)
Establishing Private Public Partnerships (P3) should have the attention of many municipal organizations across the country since, even in good economic conditions, infrastructure assets are not the highest and best use of a cities limited resources. [More]

First Half of 2013: PE Deal Flow Continues to Struggle

July 11, 2013 11:59 by Clayton Reeves in Capital Markets, M&A, Private Equity  //  Tags: , , ,   //   Comments (0)
For dealmakers, 2013 was primed to be an active time with optimism returning to markets and dry powder being expended in the form of M&A transactions.  In terms of the private equity, this did not come to fruition during the first half of the year. According to Pitckbook, deal flow continued to be stagnant through June of this year. You can see below the drop in number of deals from 1,148 in second half 2012 to 738 in first half 2013.     The monthly figures are similarly stagnant.      Despite an apparent uptick in capital invested in June, the underlying numbers tell a different story.  The $23 billion acquisition of Heinz has almost singlehandedly increased the capital invested over the prior four month average. There are several reasons we might be seeing this softness.  First, many of the deals that would've been littered across the first half of 2013 were rushed to completion in the last half of 2012, for tax purposes.  Furthermore, the optimism that we expected to guide M&A recovery has also spurred increases in equity prices, thus keeping multiples high.  In an already challenging environment for buyers, this has made closing a deal even more difficult.  There is hope, however.  Some professionals are seeing increased activity during the first half of 2013, although they said that the fruits of these labors would not be seen until later in 2013. Read the rest of the Pitchbook report here.

PE Firms Finding Exits Easier Than Investment Opportunities

June 25, 2013 12:33 by Clayton Reeves in Capital Markets, M&A, Private Equity  //  Tags:   //   Comments (0)
In an article on Dealbook today, this year $62 billion worth of deals larger than $1 billion have been announced, according to Thomson Reuters. That seems to be a positive indicator, as it represents a higher value than all of 2012; however, the purchase of the Heinz Company ($27 billion) and Dell Inc. ($18 billion) are atypical. Heinz was driven more by the oracle, Warren Buffett, than by private equity, and the purchase of Dell was driven by Michael Dell buying back the company bearing his namesake. According to Preqin research, the industry has $187 billion of dry powder available, which could amount to more than $700 billion of deals. Without the two atypical deals mentioned above, however, 2013 has seen only five deals amounting to $16 billion. The crux of the issue seems to be a lack of confidence in current valuations and wary attitudes regarding private equity by potential sellers. Regardless of these hurdles, the piles of cash sitting in the coffers of PE should find their way to the market by one avenue or another. It remains to be seen when that dry powder will ignite large deal volume.

Lower Equity Contributions Fueling M&A Activity

March 19, 2013 10:38 by Stephanie Siders in Financing, M&A, Private Equity  //  Tags:   //   Comments (0)
Equity contributions in private equity-backed deals are trending lower as private equity buyers increase leverage with cheap debt, enabling them to write checks for a lower percentage of the entire deal.  Equity contributions in leveraged buyouts averaged 39.4% in 2012, the lowest level seen since 2007.  The combination of cheap debt, lower equity contributions, and continued high levels of dry powder bodes well for increased M&A activity and deal size.   Read more here.

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