Friday, February 4, 2011

Industry Thoughts | The PEGCC's Report On Buyout Activity...And Why I'm Worried

The PEGCC (Private Equity Growth Capital Council) released their 2010 buyout activity report today, and the title says it all: Buyout Activity Returns to 2008 Levels.

This is scary.

I remember at the ACT CT PE Expo late last year that multiples for many deals were going between 9x and 12x, scaring away many of the mid-market private equity firms. Did firms forget what happened a few years ago? I'm hoping that the leverage ratios that buyout shops are using involve a significantly more amount of equity, because this data will not help PE, both with regards to setting the industry up for another dip down as well as how the industry looks in the eyes of Congress.

The link to the article is here (get a free subscription to read it), but here are the key passages below:

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Private equity-based buyout volume for all of 2010 reached $221 billion, according to the report, the highest figure since 2008. The 96 private equity-backed initial public offerings that took place over the course of the year raised over $35 billion globally, up from 32 IPOs that raised $12.7 billion in 2009, the PEGCC said. Exits in the US during 2010 totaled in excess of $110 billion, more than double the value of exits in 2009.

Total fundraising in 2010 reached roughly $104.4  billion, compared to $100.3 billion in 2009 and $99.8 billion in 2004. As of January 2010, buyout dry powder stood at an estimated $446 billion globally.

The PEGCC’s index measures global private equity activity based on total direct investment, buyout transaction volume, fundraising and the dollar value of private equity exits. The index reaches 100 when all four components are at their 10-year moving average. As of the end of 2010, the index stood at 115.3, its highest level since the fourth quarter of 2007.
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Let me know what you guys think in the comments!

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