10 Private Equity Insights You Need To Know

The private equity sector is back to normal. Immense pressure from the global financial crisis and its aftermath appears to have receded, according to the latest data from private equity research firm Preqin.

The value and volume of private equity deals have returned to – or have begun to exceed – pre-crisis levels, according to Preqin. For the investor relations community, this could mean heavier workloads in the months and years to come.

‘Global private equity deal flow has witnessed a resurgence during 2010 as a whole, with deal flow globally this year representing the strongest year for private equity deals since the onset of the global financial crisis,’ notes Manuel Carvalho, managing analyst for buyout deals at Preqin.

‘In particular, this year has been notable for a surge in both North American and European deals, with North American deal flow in 2010 more than double that witnessed during 2009, and European deal flow in 2010 almost three times the value of deals seen in the region in 2009.’

Let’s take a look at Preqin’s numbers:

1. There were 265 exits in the fourth quarter of 2010, amounting to $71.8 bn – this is the highest quarterly figure on record.

2. The sector recorded 593 announced private equity deals with a value of $64.2 bn.

3. In full-year 2010, $204.9 bn worth of buyout deals was announced, more than doubling the 2009 total value announced.

4. Almost half of the deals announced last year were leveraged buyouts, and they accounted for 53 per cent of aggregate deal value worldwide.

5. More than a quarter (26 per cent) of the aggregate value of deals in 2010 came from ‘go private’ transactions, but they accounted for less than 5 per cent in terms of the number of deals completed.

6. Deal flow in 2010 increased 130 per cent from 2009 and 35 per cent from 2008 in North America.

7. From the third quarter to the fourth quarter last year, private equity deal flow surged 40 per cent in North America, with $38 bn announced in the last three months of the year.

8. Deal flow reached $68.1 bn in Europe last year, almost three times the $24.2 bn in announced private equity deal flow the year before.

9. The aggregate value of European deals in the fourth quarter of 2010 fell 35 per cent from the third quarter, but it still exceeded fourth quarter 2009 deal flow by 39 per cent.

10. In Asia and the rest of the world, announced private equity deal flow spiked 39 per cent from the third quarter to the fourth quarter, with $8.6 bn in transactions announced.

‘The increase in activity should also signal an improvement in the fundraising market, with institutional investors’ confidence toward the market increasing, while high distribution levels will lead to more capital being reinvested in new vehicles as investors maintain their allocations to the asset class,’ Carvalho adds.

So what does this mean for the investor relations community? Well, more capital flowing into the private equity space likely translates to a need for exits in the future. Whether those liquidity events come in the form of M&A involving public companies or IPOs, there will certainly be much for IR officers to do. It may take a little while to feed through, but the 2010 numbers mean the IR community will have plenty to deal with over the next few years.

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