A Very Healthy Start to 2021 Private Equity

April 27, 2021

Heading into 2021, some analysts were expecting private equity to see a letdown. The thinking goes that the industry as a whole did incredibly well over the course of the pandemic, and as such, is due for a post-pandemic slowdown.

Based upon the first quarter of 2021’s results, this view appears to be headed to the trashcan.

Here’s a look at some of the top line figures for private equity activity through the first quarter of 2021 according to private equity data provider Pitchbook.

Private Equity Deal Activity

The first figure in Pitchbook’s quarterly update is private equity deal activity. The figure covers 2011 to the first quarter of 2021. Amazingly (at least from hindsight’s perspective), private equity activity reached $724 billion in 2020 across 5,789 deals. This was down only slightly from the awesome 2018 and 2019 results of $743 billion and $764 billion, respectively.

This background sets the stage for the 2021 picture through the first quarter. Through the first quarter, deal activity summed to $203 billion across 1,763 deals. If one were to annualize these first three months’ figures, private equity deal activity would sum to $812 billion and the number of deals would reach somewhere around 7,052. Now, deals won’t reach that astronomical number, but it does speak to the healthy nature of private equity activity going on right now. Private equity knows well the phrase “a crisis is a terrible thing to waste.”

Source: Pitchbook

Private Equity Deals by Type

As an even stronger signal of the 2021 picture (although it is somewhat difficult to decipher from the figure), private equity growth deals and add-ons are taking on an ever-larger share of the deal pie. The trend towards growth deals and add-ons is a long term trend that accelerated with the onset of the global pandemic.

Source: Pitchbook

A View of the Activity by Sector

Perhaps the most interesting figure from the Pitchbook report is the change in activity by sector. Interestingly, when annualizing the deal activity across sector, all activity would be positive compared to 2020. The number of deals by sector, though, is quite different.

The number of deals for the Energy and Materials & Resources sectors is trending lower by up to 10%. In contrast, the number of deals in the Business to Consumer, Business to Business, Financial Services, Healthcare, and Information Technology is trending up.

Source: Pitchbook

Private Equity Median Multiples

The Pitchbook report offers may interesting views of the state of private equity. The last view covered here is the median private equity buyout multiple by rolling four quarters. Interestingly, and somewhat surprisingly, the multiples are generally trending down, with the most recent figure for the first quarter of 2021 trending towards 12x.

Source: Pitchbook

Summing Up

Overall, based upon the first quarter’s figures, 2021 is shaping up to healthy. Instead of seeing a post-pandemic letdown, private equity is on track to be a signal of strength in the (hopeful) economic expansion on the horizon.

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