Daily News: January 7, 2013

Private Equity Buyout Deal Flow Reaches Post-Lehman High in 2012

Preqin data shows that North American deal flow reached a post-Lehman high in 2012. This contributed to strong global deal flow recorded in 2012, with 2,866 buyout deals announced valued at $254.6 billion. This nears the global post-2008 highs of 2011, which witnessed $264.8 billion globally from 2,900 buyout deals. Compared to 2010, global deal flow in 2012 represents a 14% increase in the number and a 15% rise in the value of buyout deals.

North America also witnessed a post-Lehman high in 2012 in relation to exits, with $147.1 billion worth of exits taking place in the region during the year. However, global private equity-backed exit flow for 2012 stood at 1,192 exits valued at $275.2 billion, down from the 1,145 exits valued at $310.1 billion in 2011, which was the highest level since the onset of the financial crisis. Q4/12 witnessed 304 private equity-backed exits valued at $72.2billion, an 11% increase in the number and a 2% increase in the value of exits compared to Q3/12.

Other Key Facts:

  • Q4/12 was the second strongest quarter for deal flow in North America in the post-Lehman era, with 431 buyout deals announced valued at $41.3 billion, surpassed only by the $50.7 billion in Q3/12.

  • Europe, which continues to rebound from the declines in deal flow in mid-2011, saw 192 buyouts valued at $24.5 billion during Q4/12, a 76% increase in aggregate deal value compared to Q3/12, which witnessed 194 buyouts valued at $13.9 billion, and a 69% increase in deal value from the same period in 2011.

  • Buyout deal flow in Asia Q4/12 dropped by almost a third in both the volume and value of deals witnessed compared to Q3/12, with 53 buyout deals valued at an aggregate $5.4 billion in Q4/12.

  • 43% of all deals in 2012 were leveraged buyouts, representing almost two-thirds of the aggregate value of deals globally during the year.

  • Add-on deals, which made up 18% of all buyout deals pre-financial crisis, accounted for a third of all buyout deals in 2012, as private equity firms continued to consolidate current holdings.

  • The majority of buyouts announced in 2012 were small-cap deals, with 58% of the number of deals announced in 2012 valued at less than $100million, and 78% of all deals valued at less than $250million.

  • The mid-market sector accounted for 14% of all deals and 28% of the value of deals in 2012.

  • Large-cap deals valued at over $1 billion accounted for over half the aggregate value of deals globally during the year.

    “Despite a difficult opening to the year due to continued turbulent market conditions, 2012 has seen the buyout deal flow approach the post-Lehman high in deal number and aggregate value witnessed during 2011,” Anna Strumillo, Manager at Buyout and Venture Capital Deals, said. “In particular, North America witnessed a strong 2012, recording a post-2008 high for the year of 1,590 buyout deals valued at an aggregate $152.3 billion. In contrast, European deal levels remained low in 2012. However, the $24.5 billion of European deals announced during Q4/12 is a 76% increase from the previous quarter, an encouraging indicator for 2013. With buyout firms continuing to hold an estimated $357.9 billion in dry powder as of January 2013, alongside a strong North American buyout market and a rebounding European deals market, private equity fund managers remain in a strong position in the coming months to continue to deploy their capital in opportunities globally, despite continuing market challenges.”

    Preqin is a source of information for the alternative assets industry, providing data and analysis via online databases, publications and bespoke data requests.

    To view the factsheet, click here.