PE/VC investments halve in May as large deals dry up: EY report

  • Deals greater than $100 mn by value fell to just five, aggregating $1.8 bn, against 16 worth $5.2 bn a year ago
  • Analysts expect deal momentum to pick up with the poll results and a strong pipeline in place

Mumbai: The dollar value of private equity (PE) and venture capital (VC) deals fell 54% to $2.8 billion in May on the back of fewer large deals, compared to the corresponding month of last year, according to EY’s Private Equity Monthly Deal Tracker.

Large deals—those greater than $100 million by value—declined to five transactions aggregating $1.8 billion in May, compared to 16 large deals worth $5.2 billion in the year-ago period.

“Although deal momentum appears to have slowed down in May 2019, with a decisive electoral mandate behind us and a strong deal pipeline in place, we expect investment momentum to pick up in the coming months," said Vivek Soni, partner and national leader, private equity services, EY.

“May 2019 recorded some large investments in real assets by sovereign wealth funds and Canadian pension funds. We expect REITS and InvITs to be one of the preferred structures for raising capital by real asset owners/developers in 2019, with large PE funds, pension funds and sovereign wealth funds coming on board as anchor investors," he added.

About 40% of the total investments in May came from sovereign wealth funds and pension funds. Some of the large transactions included Caisse de dépôt et placement du Québec’s buyout of three road assets from Essel Infraprojects for $500 million, followed by Singapore-based sovereign wealth fund GIC’s commitment of $420 million in a 70:30 joint-venture with Indian Hotels Co. Ltd to build and acquire hotels in India, besides another $400 million investment by GIC and KKR to acquire a controlling stake in India Grid Trust.

The infrastructure sector received the highest investment commitments of around $900 million, followed by real estate, which saw investments to the tune of $507 million.

Even as the total investment value fell, the number of deals in May was 24% higher at 82 on a year-on-year basis. The number was, however, 25% lower sequentially, as April recorded the highest number of PE/VC deals ever for any month (109 deals).

Buyouts were the flavour of the month as they comprised half the investment flow in May at $1.4 billion, about 17% higher than May 2018. Besides buyouts, there was a significant decline in other types of deals, such as growth capital, which fell 82% to $394 million on a year-on-year basis. Investments in startups also nearly halved to $622 million.

May saw 11 exits, which was 55% lower at $739 million, compared to May 2018. While most exits during the month were through strategic deals amounting to $733 million, there were none via open market or initial public offerings.

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