Buy­out deals drive bumper 2018 for pri­vate eq­uity, says re­port

Mint ST - - DEALS - M. Sri­ram sri­[email protected] MUM­BAI

Global pri­vate eq­ui­ty­backed buy­out deals touched a record for the sec­ond con­sec­u­tive year in 2018, ac­cord­ing to a re­port from Pre­qin, an al­ter­na­tive as­sets data tracker.

A to­tal of 5,106 pri­vate eq­uity-backed buy­out deals were an­nounced through the year, up from the pre­vi­ous record of 4,829 seen in 2017. The to­tal value of these deals also rose from $388 bil­lion in 2017 to $456 bil­lion.

The all-time high record for buy­out deals was $460 bil­lion in 2015.

“If 2017 was a year marked by record lev­els of fundrais­ing, then 2018 was a year marked by record lev­els of deal mak­ing,” said Christo­pher Elvin, head of pri­vate eq­uity, Pre­qin.

“With dry pow­der break­ing the $1 tril­lion bar­rier in 2017, some feared that there was too much cap­i­tal avail­able that might over­heat the mar­ket and de­ter deal mak­ing,” he said.

“In fact, we have seen the op­po­site oc­cur, but some doubt re­mains: dry pow­der has kept climb­ing to $1.2 tril­lion, and fund man­agers and in­vestors both still say that as­set pric­ing is a con­cern,” Elvin added.

The $456 bil­lion in 2018 was also the sec­ond high­est since the fi­nan­cial cri­sis. Deals worth $700 bil­lion were recorded in 2007.

The $21 bil­lion merger of bev­er­age-maker Keurig Green Moun­tain and Dr. Pep­per was the year’s largest buy­out deal of the year.

Refini­tiv, the fi­nan­cial risk unit of Thom­son Reuters, was sold to pri­vate eq­uity gi­ant Blackstone for $17 bil­lion in the other large buy­out of the year.

Add-ons ac­counted for 42% of the num­ber of deals in 2018,

as firms ac­quired ad­di­tions to their ex­ist­ing as­sets.

The 54 pub­lic-to-pri­vate deals an­nounced in the year ac­counted for 17% of deal value, de­spite rep­re­sent­ing just 1% of the num­ber of deals.

Buy­out-backed exit ac­tiv­ity was also strong, re­main­ing broadly on a par with 2017. The year 2018 saw 1,958 ex­its worth $326 bil­lion, com­pared to 1,977 ex­its for $297 bil­lion in the pre­vi­ous year.

The largest trans­ac­tion was the $8.3 bil­lion sale of BMC Soft­ware, Inc. to KKR, which was also the sixth largest ac­qui­si­tion of the year.

Dur­ing 2018, deal ac­tiv­ity was di­ver­si­fied to dif­fer­ent sec­tors, wherein in­dus­tri­als and in­for­ma­tion tech­nol­ogy ac­counted for 14% and 15% of deal value, re­spec­tively, while health­care (which ac­counted for 13%), tele­com (12%) and busi­ness ser­vices (12%) rep­re­sented sub­stan­tial por­tions of deal value.

Mint had re­ported on 3 Oc­to­ber 2018 that buy­out trans­ac­tions by pri­vate eq­uity firms in In­dia rose to $5.5 bil­lion dur­ing the year, the high­est in five years.

Buy­outs also dou­bled com­pared to the pre­vi­ous year’s buy­out deals worth $2.7 bil­lion, ac­cord­ing to data from pri­vate cap­i­tal tracker Ven­ture In­tel­li­gence.

Christo­pher Elvin, head of pri­vate eq­uity, Pre­qin.

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