When one thinks of a firm involved in mergers and acquisitions (M&A), the idea of a startup generally does not come to mind.  Rather, when most people think of M&A, they likely think of large, multi-national corporations acquiring a company that has been through multiple rounds of funding and has proven successful at its craft.

Oh, how the world has changed.  With private companies staying private longer, so-called startup companies (if you can call them startups) have turned to M&A for growth opportunities.  The following are notes out of private equity data provider Pitchbook on the emergence of startups as M&A dealmakers.

M&A Activity by US VC-backed Companies

Figure 1 below has the deal count and deal value by US VC-backed companies in M&A activity.  The left axis is the deal value, in billions of US dollars.  The right axis is the number of deals.  The chart goes from 2009 (the depths of the global recession) through June 4, 2019. 

In 2009, startups made $10.3 billion in M&A deals across 315 deals.  This grew to $43.5 billion in 2015 across 720 deals.  In 2016, M&A activity by startups slowed a bit to $35.6 billion in value across 643 deals.  Then, in 2017 and 2018, deal values totaled $44.8 billion and $39.4 billion, respectively.

Fast forward to 2019 – through the first five months of startup M&A activity, startups have acquired $19.5 billion worth of other companies across 242 deals.  That’s a massive jump from the 2009 doldrum figures of just $10.3 billion.


Source: PitchBook

What’s Behind the Rise?

Why the rise in M&A activity by so-called startup companies?  At least two recent trends explain most of the rise of the “startup M&A”.

First, startups are staying private longer.  Firms such as Uber, Lyft, and others had more than enough private money searching out a profitable private investment that they did not need to turn to the public markets.  In general, the longer an owner can stay private in a company that has the resources it needs to grow past unicorn status, the more money the owner of the company will make.  It’s as simple as that.

The second reason for the rise is the massive amount of money venture capital and private equity firms have at their disposal to work with startups.  It used to be the case that startup companies would compete for a very limited supply of high finance money.  The situation has flipped.  High finance investment firms are competing with each other for the best investment options.  Companies wait to be wined and dined.

Conclusion

In a shift from the historical norm, startup companies are moving into the M&A scene.  These private companies gain growth without having to look to the public markets for financing – likely a sign of a changing financial world.

{ 0 comments }

Average salaries in the private equity (PE), venture capital (VC) and corporate venture capital (VC) are generally high compared to other professions. How well did industry pay do last year and what is expected this years?  A look follows.

Average Pay Growth in PE, VC, and CVC

What is expected to happen with average pay at PE, VC, and CVC firms in 2019?  Is average pay anticipated to grow faster than average economywide pay growth of around 2.5 percent?  The following chart from private equity data provider Pitchbook provides one look at the figures.

According to Pitchbook, the average salary increase for a director/principal in 2019 is 14 percent.  This is tops among the job categories reported by Pitchbook.

Three job titles come in tied for second place at 12 percent.  They include managing, general partner; managing director, partner; and associate.

The job titles rounding out the list include senior managing direct, senior partner and senior associate.  According to the respondents, the average pay increase in 2019 was expected at 11 percent. Overall, a very, very healthy year for pay growth at private equity, venture capital, and corporate venture capital firms.

Some Details on CVC Pay Growth

Perhaps the most interesting area of the reported figures is the corporate venture capital area.  The area is rarely reported as separate from venture capital, but in reality it definitely is a separate area of the investment world.

The following takes a deeper look at the data.

Interestingly, the average pay increase for CVC employees among the four depicted job categories is 6 percent for 2019.  These four job categories include analyst, associate; CFO, portfolio management; CV unit leader; and senior investment professional. 

The 2019 figures are relatively low for the industry as a whole.  Interestingly, the 2018 figures were higher than the 2019 expected figures.  Of the four job categories, 2018 was most kind to CVC unit leaders.  CVC unit leaders saw average salary increases of 8 percent in 2018.  Not far behind were CFO/portfolio management/senior investment professional at 7 percent.  Coming in last place were the analysts/associates at 6 percent pay growth.  Overall, all job categories are anticipated to have another good 2019 on top of a healthy 2018.

Conclusion

Pay is expanding at a healthy pace in the PE, VC, and CVC industry.  With average pay across the country expanding by around 2.5 annually, pay is anticipated to grow twice that pace at PE, VC, and CVC firms in 2019.  It’s a good time to be connected with private equity and venture capital.  Then again, is it ever a bad time?

{ 0 comments }

The last couple of years have been good for the financial industry.  Financial industry employment is up 1.8 percent since the end of 2017.  Not the strongest growth rate – that title belongs to Natural Resources, Mining, and Construction at 5.8 percent – but stronger than Trade, Transportation, and Utilities, Retail Trade, and Information.

Source: Bureau of Labor Statistics

The sanguine picture of financial industry employment, coming at a time when the global economy seems to be at a crossroads, suggests that now may be a good time to review the top 10 years for financial employment. 

Before looking at the list, which year would you guess had the strongest average year-over-year financial industry employment growth?  The financial booms of 2005 to 2007?  What about the dot-com boom in the late 90s and early 2000s?

Take your guess now.  The list follows.

The Top 10 Years for Financial Employment Growth

10. 1967

In tenth place is 1967. The year of the Mustang saw financial employment expand 4.2 percent in a year when the overall Unemployment rate was 3.8 percent.

  • Financial employment Year over Year: 4.2
  • Employment Total: 65,935,416.7
  • Employment Total Year over Year: 3.0
  • Unemployment rate Total: 3.8
  • Ratio civilian employment to population: 57.3
  • Labor Force Participation Rate: 59.6

9. 1998

In ninth place is 1998. The dot-com era year saw financial employment grow 4.3 percent and the Unemployment Rate was 4.5 percent.

  • Financial employment Year over Year: 4.3
  • Employment Total: 126,146,833.3
  • Employment Total Year over Year: 2.6
  • Unemployment rate Total: 4.5
  • Ratio civilian employment to population: 64.1
  • Labor Force Participation Rate: 67.1

8. 1955

In eighth place is 1955. The post-World War II year saw financial employment grow by 4.5 percent and the Unemployment Rate was 4.4 percent.

  • Financial employment Year over Year: 4.5
  • Employment Total: 50,736,833.3
  • Employment Total Year over Year: 3.4
  • Unemployment rate Total: 4.4
  • Ratio civilian employment to population: 56.6
  • Labor Force Participation Rate: 59.2

7. 1977

In seventh place is 1977. The pre-hyperinflation year saw financial employment grow by 4.6 percent and the Unemployment Rate was 7.1 percent.

  • Financial employment Year over Year: 4.6
  • Employment Total: 82,599,750
  • Employment Total Year over Year: 3.9
  • Unemployment rate Total: 7.1
  • Ratio civilian employment to population: 57.9
  • Labor Force Participation Rate: 62.2

6. 1985

In sixth place is 1985. The early Reagan years saw financial employment grow by 4.7 percent and the Unemployment Rate was 7.2 percent.

  • Financial employment Year over Year: 4.7
  • Employment Total: 97,528,666.7
  • Employment Total Year over Year: 3.2
  • Unemployment rate Total: 7.2
  • Ratio civilian employment to population: 60.1
  • Labor Force Participation Rate: 64.8

5. 1968

The first member of the top 5 is 1968. The second year in this top 10 list from the 1960s saw financial employment grow by 4.8 percent with an Unemployment Rate of 3.6 percent.

  • Financial employment Year over Year: 4.8
  • Employment Total: 68,026,666.7
  • Employment Total Year over Year: 3.2
  • Unemployment rate Total: 3.6
  • Ratio civilian employment to population: 57.5
  • Labor Force Participation Rate: 59.6

4. 1969

In fourth place is another 1960s year, this one the last year of the 1960s – 1969. The year saw financial employment grow by 5.3 percent with an Unemployment Rate of 3.5 percent.

  • Financial employment Year over Year: 5.3
  • Employment Total: 70,514,833.3
  • Employment Total Year over Year: 3.7
  • Unemployment rate Total: 3.5
  • Ratio civilian employment to population: 58.0
  • Labor Force Participation Rate: 60.1

3. 1979

In third place is the hyperinflation year of 1979. The year saw financial employment expand by 5.3 percent with an Unemployment Rate of 5.9 percent.

  • Financial employment Year over Year: 5.3
  • Employment Total: 89,935,500
  • Employment Total Year over Year: 3.6
  • Unemployment rate Total: 5.9
  • Ratio civilian employment to population: 59.9
  • Labor Force Participation Rate: 63.7

2. 1986

In second place is 1986. The second Reagan year saw financial employment explode by 5.4 percent with an Unemployment Rate of 7.0 percent.

  • Financial employment Year over Year: 5.4
  • Employment Total: 99,497,500
  • Employment Total Year over Year: 2.0
  • Unemployment rate Total: 7.0
  • Ratio civilian employment to population: 60.7
  • Labor Force Participation Rate: 65.2

1. 1978

The top year for financial employment growth was 1978. This year – 40 years ago – saw financial employment grow by an incredible 5.8 percent with an Unemployment Rate of 6.1 percent.

  • Financial employment Year over Year: 5.8
  • Employment Total: 86,829,083.3
  • Employment Total Year over Year: 5.1
  • Unemployment rate Total: 6.1
  • Ratio civilian employment to population: 59.3
  • Labor Force Participation Rate: 63.2

Methodology Data was taken from the Bureau of Labor Statistics.  The reported figures are the annual averages of the reported monthly figures.  The analysis uses the period 1950 to May 2019.  The ranking is of financial employment growth, which is the average year-over-year growth rate in financial activities.

{ 0 comments }

The Global League Tables are Out – Who’s on Top

May 27, 2019

The Global League Tables – those quarterly reports out of Pitchbook and affinity – are out for the first quarter of 2019. Which companies would you guess showed up on top and which were the bottom-dwellers? Here’s a look. Large Private Equity Investors Across the Globe First up, the large global private equity investors. Large […]

Read the full article →

New IRS Rules on Opportunity Zones Could Bring VCs Back In

May 13, 2019

New IRS Rules on Opportunity Zones Could Bring VCs Back In

Read the full article →

2019 Could be a Record-Breaking Year for Venture Capital

April 29, 2019

Friday’s GDP report was somewhat of a shocker.  Gross domestic product grew by 3.2%. Quite healthy by most any measure.  Contrary to popular economic opinion, economic growth is strong.  There is absolutely no evidence yet of a recession. Could the strength in the overall economy show up in venture capital markets?  The answer is yes.  […]

Read the full article →

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 […]

Read the full article →

Why are PE and VC investors steering away from opportunity zones?

April 1, 2019

Why are PE and VC investors steering away from opportunity zones?

Read the full article →

Who are the Top 10 Investors in Blockchain?

March 18, 2019

Blockchain is all the rave in today’s early-stage investing world.  If you are in any way interested in the future of money or accounting or ledgers, it is impossible to avoid a discussion about blockchain. Given the popularity of blockchain, can you guess which entities are the top 10 venture capital (VC) investors in blockchain? […]

Read the full article →

Some Thoughts on 2018 Results Heading with 10 Months Left in 2019

March 4, 2019

We’re a couple months into 2019, which means we are just now starting to get final 2018 figures.  Let’s see how well you know what the 2018 venture capital landscape looked like. First Question: How much did U.S.-based venture capital-backed companies raise in 2018? U.S.-based companies raised an astonishing $99.5 billion this past year.  Will […]

Read the full article →
Real Time Web Analytics