The latest research from PitchBook - Merrill Datasite shows that PE firms have reported a continuing decrease in both their investments and exits as of Q2 2012.
- Deal volume fell by 17% in 2Q 2012 compared to the previous quarter and has been in a steady downward trend for more than a year.
- The $51 billion invested during 2Q was the lowest for any individual quarter since 2009.
- PE firms have demonstrated an increased focus on B2B, IT, and Healthcare investing.
- Both exit volume and capital exited plummeted in 2Q 2012, declining by 16% and 42% respectively, compared to the previous quarter.
The amount of capital invested in Q2 decreased by 8% from the previous quarter but the more drastic decline came in deal volume, which fell 17%. When comparing Q2 2012 to the same period in 2011, the results are even worse: a decline of 39% in deal volume and 37% in capital invested. In fact, the $51 billion invested during Q2 was the lowest level for any individual quarter since the post-bubble year of 2009, and with just 303 deals, it was the worst quarter by
volume since before 2006.
volume since before 2006.
Deal-making was fairly consistent throughout 2011, but levels have slipped through the first half of 2012. Compared to Q2 2010, deal flow was down 48% and capital invested declined 58% in Q2 2012. Halfway through the year, PE firms are on track to close just 1,332 deals in 2012, which would be the lowest level since 2003.
“For all of the headwinds facing PE and the economy at large, two irrefutable forces will continue to compel PE firms to action: the more than $430 billion in dry powder reserves and the more than 6,300 companies currently in portfolios,” says Richard A. Martin, Jr., Senior Director at Merrill DataSite. “Regardless of the macroeconomic environment, PE firms will have to act in order to exit longstanding investments and deploy capital before their investing window closes.”
In terms of capital, exit activity has been a mixed bag so far in 2012. The Energy industry has emerged as a definitive bright spot for PE exit activity. In the first half of 2012, PE firms sold 24 Energy investments for a total of $28.2 billion, which is already more than any year on record. Exit activity in Information Technology has been strong as well; firms have already realized more than $14 billion in exited investments in 2012, nearly surpassing the 2011 total. Furthermore, PE firms have already exited more Financial Services companies in 2012 than in all of 2011. On the other hand, 2012 is shaping up to be one of the slowest years in recent memory for both B2B and B2C. Halfway through the year, total exited capital in both of the industries is approximately one quarter of the amount reached in 2011.
To access the complete report (free), please go to the "Research" section at: Generation Equity Advisors
Generation Equity Advisors, LLC
