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private equity

An Awesome Start to 2019 – Can the String Continue?

April 15, 2019

The first quarter of 2019 was an awesome start to the year for growth equity funds.  According to data from Private Equity International, growth equity funds saw $24.9 billion in fundraising.  The $24.9 billion is the strongest start to a year in the past ten years.  Prior to 2019, the strongest start was 2011 at $23.05 billion.

Other areas of the private equity universe have not done as well so far in 2019. The first quarter of 2019 for Fund of Funds was tiny at just $0.9 billion, the lowest fundraising total in the over the period shown.

Venture capital fundraising was also weak at just $5.9 billion.  The next weakest year over the past decade was Q1 2010 at $6.1 billion. 

The very weak first quarter for Fund of Funds and venture capital was almost matched by secondaries.  Fundraising for secondaries came in at $1.1 billion, second lowest in the past decade.  The weakest first quarter figure was in Q1 2009 at a dismal $0.6 billion.

Lastly, Other private equity investments, which includes co-investments, distressed, and turnaround investments, came in at $4.2 billion.  Compared to the past decade’s results, this was the third weakest.  The only two weaker first quarter figures were in 2011 and 2009 at $2.5 billion and $3.7 billion, respectively.

Source: Private Equity International

Is this an ominous signal for the rest of 2019?

The strong growth equity fundraising figures combined with the weak venture capital/Fund of Funds/secondaries/Other presents a conflicting story. 

Which one will win out?

If one uses the total fundraising figure and annualizes the first quarter’s results, 2019 is headed for a slightly weaker year than 2018.  This, of course, would mean that no collapsing years similar to 2009/2010 are on the horizon for the remainder of this year. 

Anyone willing to bet that 2019 will come in much weaker than 2018 when the end of the year arrives?  Does growth equity results have you scared off from betting on weakness? 

Oh, the loveliness of private equity fundraising and predicting future returns.

Source: Private Equity International

Conclusion

In looking at the first quarter of 2019, growth equity private equity funds have done quite well.  All other private equity categories haven’t fared as well, which presents us with an interesting question – Which category will be the leading indicator for the rest of 2019?

History belongs to the bold, those that can predict the future before it happens.  Which direction do you have for the remainder of this year?

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Could Take-Privates Spike in 2019?

December 24, 2018

In an interesting speculation on the state of the private equity universe, Adam Lewis of private-equity data provider Pitchbook is out with an interesting look take on the “take-privates” activity.  In particular, he speculates that the take-private activity will spike in 2019.

Some Background

Before getting into the reasons why take-private activity could spike in 2019, let’s first address what a take-private is.  In the world of finance, there are public companies and private companies.  Public companies trade on transparent exchanges.  These companies tend to be larger in size with liquid supply and demand for their stock.

By contrast, private equity – which can also be quite large at times – are companies where stock is generally closely held individuals or entities.  The company is private because one can’t simply go to an exchange and buy stock in the company.  Instead, if an investor is interested in owning shares in a private company, he must offer to buy into the private company.  The prices at which shares trade hands in private companies are generally not public information.

So, Why Could Take-Private Activity Spike in 2019?

With this background in mind, why would take-private activity spike in 2019?  The Pitchbook blog writer offers really one reason, although a second is mentioned here.

First, according to Pitchbook analyst Wylie Fernyhough, the number of take-privates grows in tandem with deal sizes.  And 2018 saw massive deal sizes.  Because of this, one might expect take-private deals to spike in 2019.

“For proof, the median take-private deal size in 2018 was $977 million as of November 30, while the median deal size for other non-take-private buyouts checked in at roughly $175 million. And top-dollar buyouts are only increasing. There have now been more than 70 buyouts of $1 billion or more in the US in two consecutive years for the first time ever, and the number of mega-funds closed over the past three years is more than any period on record.”

Second, given the recent route in equity markets, price-to-earnings ratios are down.  If this continues to be the case in 2019, one would expect private equity buyers to be on the lookout for attractive deals they can afford.

take private Source: Pitchbook

Conclusion

In an interesting take on take-private activity, some analysts are predicting a spike in action in 2019.  Whether that will happen, of course, depends upon market conditions, interest rates, and overall expectations of the value of a privately held company compared to being a publicly held company.

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Who are the Top 11 PE investors in the US Midwest?

November 27, 2018

Private equity data provider Pitchbook recently released some interesting data on the top 11 private equity (PE) investors in the U.S. Midwest.  Which entities would you guess show up on top?

Would you guess the big entities – Canadian Pension Plan Investment Fund, AlpInvest Partners, Hamilton Lane, HarbourVest Partners, or Washington State Investment Board show up on the list?  (Here’s a list of other big investment companies)  Perhaps the private equity arm of Goldman Sachs shows up on the list?  Blackrock?

Take your guess now.  The results follow.

The Top 11 Private Equity Investors in the US Midwest?

What follows is Pitchbook’s accounting of the top 11 private equity investors in the Midwest.

Fascinatingly, on top of the list is AEA Investors.  AEA Investors is headquartered in New York, New York.  The firm mainly represents private investment vehicles for family offices with substantial assets.  AEA Investors operates by using leveraged buyouts and mezzanine and senior debt investing.  The firm covers a host of physical industries, including industrial products, specialty chemicals, and retail sectors.  It is the wide swath of sectors that probably places AEA Investors on top.  The Pitchbook list has 20 private equity investments in the US Midwest.

In second place is Apollo Global Management.  The New York, New York-based company was founded in 1990 and invests in a similar space as AEA Investors, with the addition of a stronger focus on credit and real estate investments.  Pitchbook’s accounting has Apollo Global Management having made 18 investments in the US Midwest.

Tied for third place are two relatively well-known investment firms – Blackstone and McCarthy Capital.  Blackstone is one of the largest private equity investment companies in the world, with 742 investment professionals and 1,284 investments.  McCarthy Capital is much smaller on a global scale, with 14 investment professionals and 78 overall investments.  Pitchbook has Blackstone and McCarthy Capital having made 16 investments each in the US Midwest.

Rounding out the top five is Capital for Business.  According to Pitchbook, Capital for Business has 6 investment professionals and has made 125 investments.  Of the 126 investments, 14 have been in the US Midwest.

The remaining members of the top 11 are TA Associates (13 investments), Clearview Capital (13 investments), Eagle Private Capital (13 investments), The Riverside Company (11 investments), Summit Partners (11 investments), and Silverhawk Capital Partners (11 investments).

top11pe

Conclusion

In an interesting review of the top private equity investors in the US Midwest, some surprising results show up.  Overall, Pitchbook’s list sums to 156 investments made by the top 11 private equity firms across the US Midwest.  Times are certainly good to be a private equity investor or an owner of a company that captures the attention of an interested private equity buyer.

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What has Private Equity Employment Done this Year?

August 5, 2013

With the Labor Department recently reporting that the economy added 162K seasonally adjusted jobs, one might wonder: how many jobs has the private equity industry added so far this year, and how does the private equity industry compare to other industries? Here are the numbers.  Through the first six months of 2013, the private equity […]

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Disadvantages of Private Equity Emerging Managers

April 1, 2013

Private equity emerging managers face many disadvantages on the road to success.  This article discusses seven of them. Before addressing the disadvantages of private equity emerging managers, here’s a brief review from last week of the advantages emerging managers have (further discussion is available here). Private equity emerging managers have the ability to make potentially […]

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Commodity Prices and Private Equity

March 4, 2013

Oil, the world’s black gold, is currently trading at about $93 per barrel, or about 116 ($50 per barrel) percent higher than it was during its low in the first quarter of 2009.  With the price of oil now generally ticking upwards, one might reasonably ask what’s causing the oil price fluctuations. Of course, there […]

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Private Equity Firms Turn to Debt-funded Dividend Recapitalizations for Exits

October 25, 2012

The slowdown in mergers and acquisitions as a result of global economic uncertainty has prompted private equities to take the dividend recapitalization route to bolster returns. Data from credit agency Standard & Poor’s shows that debt issued to fund private equity dividends has already topped $54 billion this year, easily beating the record $40.5 billion […]

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Breaking Into Private Equity

August 16, 2012

Public History on Private Equity According to the most recent Global Alternatives Survey by Towers Watson, private equity managers currently control 22 percent of the alternative investments market.  This puts them in a strong position, behind the big leader, real estate, at 35 percent, but ahead of hedge funds, which control 21 percent of the […]

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How is the Economy Affecting the Private Equity Manager’s Life?

August 6, 2012

Private equity professionals typically spend their day evaluating various businesses and investment strategies, such as judging potential gains and losses to certain growth companies, assessing the possibility of leveraged buyouts, and gauging upside and downside risks associated with potential venture capital investments. Private equity managers do a lot of the same things that hedge fund […]

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Growth in the Alternative Investment Industry

July 25, 2012

In the latest Global Alternatives Survey, Towers Watson highlighted the sectors that saw the most growth in the alternative investment industry. Private equity managers currently control 22 percent of the alternative investments sector, behind only real-estate (at 35 percent) and ahead of hedge funds (21 percent). The Big Picture The total alternative investment sector is […]

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