Christopher Elvin, head of private equity, Preqin.
Christopher Elvin, head of private equity, Preqin.

Buyout deals drive bumper 2018 for private equity, says report

A total of 5,106 private equity-backed buyout deals were announced through the year, up from the previous record of 4,829 seen in 2017

Mumbai: Global private equity-backed buyout deals touched a record for the second consecutive year in 2018, according to a report from Preqin, an alternative assets data tracker.

A total of 5,106 private equity-backed buyout deals were announced through the year, up from the previous record of 4,829 seen in 2017. The total value of these deals also rose from $388 billion in 2017 to $456 billion.

The all-time high record for buyout deals was $460 billion in 2015.

“If 2017 was a year marked by record levels of fundraising, then 2018 was a year marked by record levels of deal making," said Christopher Elvin, head of private equity, Preqin.

“With dry powder breaking the $1 trillion barrier in 2017, some feared that there was too much capital available that might overheat the market and deter deal making," he said.

“In fact, we have seen the opposite occur, but some doubt remains: dry powder has kept climbing to $1.2 trillion, and fund managers and investors both still say that asset pricing is a concern," Elvin added.

The $456 billion in 2018 was also the second highest since the financial crisis. Deals worth $700 billion were recorded in 2007.

The $21 billion merger of beverage-maker Keurig Green Mountain and Dr. Pepper was the year’s largest buyout deal of the year.

Refinitiv, the financial risk unit of Thomson Reuters, was sold to private equity giant Blackstone for $17 billion in the other large buyout of the year.

Add-ons accounted for 42% of the number of deals in 2018, as firms acquired additions to their existing assets.

The 54 public-to-private deals announced in the year accounted for 17% of deal value, despite representing just 1% of the number of deals.

Buyout-backed exit activity was also strong, remaining broadly on a par with 2017. The year 2018 saw 1,958 exits worth $326 billion, compared to 1,977 exits for $297 billion in the previous year.

The largest transaction was the $8.3 billion sale of BMC Software, Inc. to KKR, which was also the sixth largest acquisition of the year.

During 2018, deal activity was diversified to different sectors, wherein industrials and information technology accounted for 14% and 15% of deal value, respectively, while healthcare (which accounted for 13%), telecom (12%) and business services (12%) represented substantial portions of deal value.

Mint had reported on 3 October 2018 that buyout transactions by private equity firms in India rose to $5.5 billion during the year, the highest in five years.

Buyouts also doubled compared to the previous year’s buyout deals worth $2.7 billion, according to data from private capital tracker Venture Intelligence.

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