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Unicorns – those colorful ponies that can fly – can also have another meaning. In the private equity and venture capital world, unicorns refer to the value of a company. When the value of a typically later-stage startup surpasses $1 billion in valuation, the company is called a unicorn. How is the unicorn world doing? Here’s a look.

Overall Unicorn Creation Around the World

The first look is the number of unicorns created around the world from 2016 through August 2022. Perhaps coming as no surprise, the number of new unicorns created in the past 2 ½ years is quite amazing. From 2016 through 2020, unicorn creation was typically between 5 and 10.

The pandemic changed the world, including the creation of unicorns. Based upon data provided by private equity data provider Pitchbook, new unicorn creations have exploded, averaging around 30 per month over the past 2 ½ years. Simply amazing. [Apparently printing a ton of money shows up in places where investors put their money?]

Source: Pitchbook

The North American View of Unicorns

Shifting to the North American view of unicorns, the overall picture is very similar to the global view. From 2016 through 2020, unicorn creation every month fluctuated around 5 every month. Since the latter half of 2020, unicorn creation has been much higher, fluctuating around 25 new unicorns each month. Interestingly, the most recent unicorn creation figures show significant slowing, with only 8 and 9 unicorns created in July and August, respectively.

Source: Pitchbook

The European View of Unicorn Creation

Shifting to the European view of unicorn creation, the picture is a little sparser. There were several months from 2016 through 2020 when no new unicorns were created. Interestingly, since the middle of 2020, there have been at least 1 new unicorn created every month. The recent slowdown in unicorn created has also been much less pronounced than in North America. The number of unicorns created in May and June 2022 (the most recent months for which data are available) stood at 6, not too much fewer than what was seen in prior months.

Source: Pitchbook

Summing Up

Overall, the unicorn world is growing, with the number of unicorns created in the past few years far surpassing what we had seen up to 2020. Time will tell if the rate of unicorn creation will change in the coming years, but for now, life is good as a successful entrepreneur.

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Every half year, we take stock of where private equity is standing. What follows is based on private equity data provider Pitchbook’s most recent accounting of where private equity stands through the first half of 2022.

Will Mega-Funds Raise $250 Billion in 2022

One of the more interesting predictions heading into 2022 was the amount of money mega-funds would raise. Data watcher Pitchbook pegged the figure at $250 billion in 2022, including predicting the three largest-ever buyout funds. How are things so far though the first half of 2022? Not too bad. As of the of the first half of the year, total mega-funds had raised about $103 billion for seven funds. For the entire 2021 year, total mega-funds raked in about $150 million across 14 mega-funds. Overall, 2022 is off to a reasonably healthy start to the year.

Source: Pitchbook

Will the Big Five Surpass $3 Trillion in 2022?

A second eye-brow raising prediction from Pitchbook was that the big five U.S. public alternatives managers’ assets under management (AUM) would surpass $3 trillion in 2022. Well, as of the end of the first half of the year, the big fives’ AUM is getting closer to that $3 trillion watermark. As of the end of the first half of the year, total AUM for these five summed to almost $2.6 trillion. The numbers are getting there, although not quite at the $3 trillion mark.

Source: Pitchbook

What About GP Stakes Deals?

A third very interesting prediction was General Partners (GP) deal activity. Pitchbook predicted that at least 30 GP stakes deals would close in 2022, and thereby set an all-time record. Through the first half of the year, there’s still lots of work to do to reach this prediction. As of the end of the first half of the year, only 8 deals had been counted under this classification on total deal value of $1.0 billion. That leaves a lot of work to do to reach the 30 deal goal. Unless we see a very large turnaround in activity, this prediction likely won’t be reached in 2022. Too bad!

Source: Pitchbook

How Many Middle-Market Software Deals Will Be Made?

The fourth prediction out of Pitchbook was that PE firms would close a whopping 400 middle-market software deals. As of writing, the number of deals is a ways away from this 400 threshold. As of the end of the first half of the year, total deal activity had reached $16 billion over 116 middle-market software deals. Overall, unless activity goes on a massive rise, it’s unlikely that PE firms will reach the 400 deal threshold in 2022.

Source: Pitchbook

Summing Up

Overall, considering the broader economic conditions around the world, private equity activity is holding on quite well through the first half of 2022.

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The most recent look at the global mergers and acquisitions (M&A) picture from Pitchbook is out. How did things perform in the second quarter of 2022? Here’s a look.

The Overall Picture

The first look is of the overall M&A picture in North America. Activity peaked in the fourth quarter of 2021 – since then, activity has declined by approximately 30.2% and 37.6%, respectively, with about 4,571 deals closed and a combined value of $547.7 billion. Although activity is cooling, overall activity is still healthy compared to historical counts. At $547.7 billion, activity is still above its historical average as strategic buyers took stock of market volatility to find attractive growth prospects from cyclical companies.

Source: Pitchbook

The Share of M&A Value by Sector

The next view is of M&A activity by sector. Overall, M&A managers showed increasing interest in the IT sector, with about 20% of all activity in this sector. The only sector that showed greater interest was Business Products & Services, which captured about 30% of M&A managers’ interest. In third place was Consumer Products & Services at around 15%. The remaining members included Healthcare, Energy, Financial Services, and Materials & Resources.

Source: Pitchbook

A View by Payment Type

The next view is of M&A activity by payment type. Overall, by far the most common source of funding was cash at about 60%. The second most popular source of deal funding was a combination of stock and cash at around 25%, followed by stock at around 15%.

Source: Pitchbook

The Share of M&A Value by Bucket Size

The next picture is the share of M&A value by the size of the bucket. So far through the first half of 2022, the largest slice of activity was in deals valued at $5 billion or higher, accounting for around 25% of all activity. In second was deals valued between $500 million and $1 billion, capturing about 15% of all deals. Rounding out the top three were deals valued at $1 billion to $5 billion and deals valued at $250 million to $500 million, with both capturing around 10% of the deal value. Smaller deals accounting for the remaining activity.

Source: Pitchbook

Summing Up

Overall, global M&A activity continued its modest slowdown in deal value and volume over the course of the second quarter. This came at a time when the S&P 500 suffered its worst first half of the year since 1970. Time will tell how activity will shape up for the remaining two quarters of the year.

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5 Looks on the State of the Economy According to the Labor Market

July 19, 2022

Financiers are nervous about the outlook for global growth. War, high inflation, and peaking elevated levels of government spending can do that to you. The worry about a potential recession shows up in many economic indicators, but in one place – the jobs market – evidence of pending economic calamity is lacking. Here’s a look. […]

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The State of the Unicorn World

July 6, 2022

Global growth is slowing – in some places, quite dramatically. The downward drift in economic activity poses the question of how unicorns will – companies valued at $1 billion or more –do in the coming year. Here’s a look at the unicorn picture right now according to private equity data provider Pitchbook. Unicorns Overall The […]

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The Recent Fed Rate Hike Doesn’t Spell As Much Doom As the Market’s Response

June 21, 2022

This past week, the Federal Reserve – the world’s most powerful central bank – increased its target lending rate by 75 basis points to a high of 1.75%. Judging by the market’s response, one would think that the world was ending. Recession, recession, recession continues to be the common cry. Let’s take a step back […]

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The Three Charts that Matter for PE Right Now

June 7, 2022

With economists wondering what the next six months holds for the global economy – and private equity mangers carefully watching what the forecasts are – three charts are on the mind of every private equity manager right now. Here’s a look, and what they might mean for the private equity outlook. Inflation The hidden tax […]

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The Most Active Investors in Q1

May 24, 2022

Every quarter, private equity data provider Pitchbook releases their accounting of the most active investors each quarter by several measures. Here’s a look. Most Active Globally The first view is of the most active private equity firms globally. Before looking, can you guess any of the top 5? Likely unsurprising for long-time observers of the […]

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Looking at the State of Fintech

May 10, 2022

Perhaps the hottest area in venture capital and private equity is financial technology (Fintech). Private equity data provider Pitchbook is out with their take on the state of fintech. Here’s a look. A Timeline Before looking into more detail on the state of fintech, here’s a timeline of events we saw in the first quarter […]

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Looking at Pitchbook’s Top 5 Charts on the State of the Venture Capital World

April 26, 2022

The world is in a state of flux, and the venture capital world is no different. Here’s a look at five charts put out by private equity data provider Pitchbook on the state of the venture capital industry through the fist quarter of 2022. Quite interesting, with some surprising. Venture Capital Investing in the First […]

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