Corporate Financing Analysis - PE Buyouts To Continue Disappointing In H217 - 31 JULY 2017


The competitive global M&A climate will frustrate private equity (PE) investors. With corporate acquirers well-armed with capital thanks to the opening up of the various avenues for deal financing over the course of H117, PE firms have struggled to compete in the dealmaking arena. Despite a pick-up in activity in the second quarter, PE firms will continue to disappoint in terms of investments across the remainder of this year. We predicted back in Q117 that corporate acquirers were appearing more eager to put their cash to work once more, and so far this year this has certainly proven to be the case at the expense of funds operating in the PE arena ( see BMI ' Market Leader ' , ' PE To Be Priced Out In 2017 M&A Rally ' , February 8 2017). Further contributing to what has been a quiet start to the year for PE funds, we note that exit activity is continuing to disappoint too - especially in the IPO arena where equity capital market investors are being spoiled with choice of what to choose from ( see BMI, ' US IPO Momentum To Continue Accelerating In H217 ' , July 12 2017), and PE exits are failing to take precedence as a result. This downturn in exit activity may well also be the product of PE firms holding out for a high price for assets too, as they look to provide positive returns to the hand that feeds them.

Spending Is Down Y-o-Y

According to data from research house Preqin, PE-backed buyout deals numbered 1,001 globally in Q217, with a combined value of USD83bn - a figure well ahead of the USD55bn (across 1,008 transactions) inked by PE funds during the first quarter of the year. Despite the second quarter increase in activity q-o-q, we note that the haul of deals was coming from a low base and that y-o-y activity remains well down on a year previously. For example, Q216 enjoyed a much greater haul of deals, reaching a level of USD100bn across 1,113 transactions. In terms of where the deals were coming from in Q217, we note that both the North America and Asia regions enjoyed a strong uptick in activity during the second quarter; Europe, meanwhile saw buyout activity drop q-o-q and fall to its lowest level since the first quarter of 2016. Indeed, North American PE funds completed 537 buyout deals worth a combined USD55bn, an increase by more than two-fold from the USD25bn in deals announced during the first three months of the year. In Asia, meanwhile, the continent saw local PE funds complete 46 buyouts worth USD11bn in Q217, almost double the USD6bn spent on buyout deals during Q216. Europe was left as the underperformer in the buyout market during the last quarter, tallying the completion of just 361 deals worth a combined USD15bn, compared with the 347 deals worth a combined USD21bn recorded in Q117.

North America On Top
PE-Backed Buyout Deals In Q217 By Region By Deal Value, USDbn
Peqin Private Equity, BMI

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