How is the U.S. PE Middle Market Doing?

September 28, 2021

We are entering the final quarter of 2021. With the home stretch within purview, let’s take a look at how the U.S. private equity (PE) middle market has done through the first half of 2021. The view might be surprising.

The overall view

The first view that follows looks at the overall picture of the U.S. PE middle market according to private equity data provider Pitchbook.

Through the first half of 2021, total deal value sums to $265 billion. Interesting, if this trend continues, and all indications are that it will, total deal values will reached $530 billion, far surpassing prior peaks of $406 billion in 2018 and $416 billion in 2019.

On deal count, through the first half of 2021, total deal counts reached 1,721 – on an annualized basis this count reaches 3,442, which would also be much higher than any of the annual figures of prior years. The prior peaks were in 2019 at 2,927, in 2017 at 2,932, and in 2020 at 2,662.

Overall, the U.S. PE middle-market deal activity is, quote healthy.

Source: Pitchbook

Average capital called by PE buyout funds

What does this leadup mean for the future of PE middle-market activity? Some might suggest that the 2021 performance is setting up 2022 to be a letdown. Will that happen? Well, when judged by average capital called by PE buyout funds, the answer is no. When looking at average capital called by PE buyout funds, the percentage of fund size called for in 2021 stands at 4%. This is around where the figure has stood since 2014. One takeaway from this view is that there is more than enough money to keep the momentum going through the remainder of 2021 into 2022. Of course, time will tell.

Source: Pitchbook

A couple of views of the U.S. PE middle-market picture

There are multiple ways to slice the U.S. PE middle-market picture – a couple of other views follows. The first is add-ons as a share of all PE middle-market deals. Interestingly, according to deal value, add-ons continue to grow in size, up to 58.7% as of June 2021. The figure is even larger when slicing the data by deal count, up to 69.7%.

Shifting to the second view – share of PE middle-market add-on value by size bucket. Perhaps the most interesting nugget out of this view is that smaller firms – $25 million to $100 million – gained a little bit of ground in 2021 compared to 2018, 2019, and 2020. Smaller firms’ take are still lower than 2015 and 2016, but the trend is higher.

Source: Pitchbook
Source: Pitchbook

Summing Up

On the whole, the U.S. PE middle market is doing much better than some expected through the first part of 2021. Although the global pandemic has caused economic harm in some parts of the U.S. and global economy, the U.S. PE middle market is not one of those areas.

Comments on this entry are closed.

Previous post:

Next post:

Real Time Web Analytics