First-time US PE funds make slight comeback in 2016, but still a low portion of total fundraising

First-time private equity funds in the US amassed just shy of $7.5 billion in 2016, across 26 pools of capital. Although both figures were distinct increases from 2015 - which logged 17 first-time PE funds and $4.6 billion raised - as a proportion of total US PE fundraising, first-time fundraising activity still remains at a considerable low relative to earlier in the past decade...

What is in store for US private equity in 2017?

After a high-water mark for US private equity activity in 2015, last year experienced a significant slowing in not only the number of closed deals but also total deal value, the latter ameliorated by a bevy of blockbuster transactions. This was driven in part by the progression of a typical investment cycle, wherein after a steady ramp-up in dealmaking the market attracts more and more firms looking to cut deals and consequently becomes pricier...

PE outperformance to persist?

Only two private equity fund vintages are still underperforming relative to public indices, net of all fees, as calculated by PitchBook using the Russell 3000 Index. Funds in those particular vintages can safely be assumed to be overly impacted by the global financial crisis, while the significant outperformance of funds from vintages prior to the boom times of 2006 and 2007 can also be chalked up to a highly fervid dealmaking environment...

US PE firms dial down their pace of investing in Canadian startups

In 2015, no fewer than 159 private equity firms with headquarters in the US cut a deal with a Canadian company, a clear high for the decade. That pace has slowed considerably even as general Canadian PE activity has declined, with 105 firms active within the country through the end of October. The drivers of the decline are likely the same as in the US: a lack of quality targets given the surge in buying over the last couple of years, competition, and a surplus of dry powder contributing to loftier prices...

How long will recent PE fund vintages keep returning at a fast clip?

One of the ongoing narratives presented by recent private equity fund returns data has been the recovery of vintages most impacted by the recession. As is evidenced by the chart above, the average distributions-to-paid-in multiple of 2007 and 2008 vintages have benefited considerably from the past few years’ selling frenzy, with a high-priced M&A ...

Size Doesn’t Matter in PE Fund Performance Over the Long Term

Despite the dueling claims that smaller PE fund managers lack sophistication or sufficient scale, or that larger fund managers lack the nimbleness and operational focus and expertise necessary to improve portfolio companies, returns across different sizes of funds are relatively uniform in the long term. 10-year horizon IRRs (which use changes in NAV in addition to industry-wide net contributions over time as the cash flow inputs in an IRR calculation) for PE funds of any size bucket are between 10% and 11%...

Add-ons retain commanding share of US buyout activity

At 64% of all US buyout activity through the end of September, add-ons have never before constituted such a lofty proportion of private equity investing. Part of that is a statistical quirk—as the volume of buyouts has slid while investors by and large maintained the pace of adding on, their relative proportion was bound to increase. But as has been noted time and again over the past couple years as the add-on percentage of...

PE buyers still rooting for value in lower reaches of US middle market

The proliferation of private equity funds into all reaches of the US middle market has been well documented. Increased PE activity in the lower and core segments of the middle market is easy to see, particularly when assessing the median transaction size, which declined from a high in 2014 to $133.0 million last year and $128.6 million through the end of September. The slides aren’t dramatic, of course, but as can also be seen in the relatively more resilient proportions of PE dealmaking within the lower middle market...

Secondary Buyouts Still a Primary Route for PE Sellers

335 secondary buyouts have been closed through the end of September, putting the year on pace to fall short of 2014’s tally of 482 but still third-highest of the decade. Given the impact of outliers, this year’s total secondary buyout value may not impress as much as much as those of 2007 or 2015, but it is still quite considerable. In short, private equity sellers are still utilizing fellow sponsors as an exit route nearly as avidly as they were in the past two years...

PE Fundraisers Going Bigger in 2016 Portends Emerging Spread in Success?

At $225 million, the median US private equity fund size is higher thus far in 2016 than in the several years prior. This is despite relatively healthy fundraising activity in general, with 57 closed vehicles in the third quarter alone; one may suppose that diminished activity could artificially inflate median fund sizes, as the most successful firms are still able to close while others miss out, but that is not the case this year. The increase in size is attributable to a confluence of factors...