In 2016, private equity-backed buyout deal activity saw an increase in the number of deals but a decline in the total value of transactions, with 3,985 deals recorded for a total of $319 billion, according to Preqin.
Preqin expects these figures to rise by up to a further 5% as new information becomes available. This marks an increase from the 3,955 transactions seen in 2015 and is likely to overtake the all-time high of 4,006 buyout deals transacted in 2014, although the year is unlikely to match the combined deal value recorded in the past two years.
As expected, North America attracted the majority of buyout investment, seeing 2,137 deals concluded for $190 billion, while the total deal value in Europe fell from $93 billion in 2015 to $88 billion through 2016. Asia and the rest of the world saw aggregate values reach $24 billion and $18 billion, respectively.
However, the private equity-backed exit environment cooled slightly in 2016, following a sharp growth period in 2014 and 2015.
There were 1,682 exits made through the year, worth a combined $330 billion; this signifies a marked decline from the previous year when 1,859 exits totaled $431 billion, and is well short of the $465 billion recorded by 1,910 exits in 2014, an all-time high for the industry.
Nonetheless, exit activity in 2016 remains on a par with 2013 and surpassed all preceding years, as market participants continue to enjoy a favorable exit environment.
Deals by value band
Despite only accounting for 10% of all transactions, buyout deals larger than $1 billion represented 62% ($199 billion) of the aggregate global deal value in 2016.
Small-cap deals (less than $100 million) accounted for the majority (54%) of all transactions but just 5% of the total deal value.
Deals by industry
Buyout deals for information technology assets totaled $97 billion in 2016, nearly a third (30%) of the combined deal value, while healthcare (13%) and consumer & retail (13%) also saw significant investment.
The industrials sector saw 858 deals, the highest proportion (22%) of any industry.
Eight of the 10 largest private equity-backed buyout deals were in the US, including the $15 billion merger involving ADT Security Services, the largest transaction in 2016.
The $8.6 billion acquisition of Finnish games developer Supercell Oy from SoftBank was the second largest deal globally.
Sales to GP
While trade sales continue to dominate the exit market, sales to GP are an increasingly common exit route.
There were 531 sales to GP made through 2016 worth a combined $79 billion, accounting for 32% of all exits made and 24% of the total exit value.
Exits in US and Europe
North America saw 798 exits in 2016 worth a combined $189 billion, while in Europe 670 exits were made for an aggregate value of $113 billion.
The US accounts for nine of the top ten exits made in 2016, including the $4.4 billion exit from MultiPlan, while the other exit was made in Spain.
“The opening quarter of the year represented some of the lowest levels of global deal flow seen in recent years, but since then buyout deal activity has rebounded well and is on track for a record number of transactions,” says Christopher Elvin – Head of Private Equity Products, Preqin.
“The total number and aggregate value of exits across the industry remain lower than the extremely high levels seen throughout 2014 and 2015, however 2016 still represented another successful year of exit activity.
“2017 seems likely to present a continuation of the levels of activity in the buyout and exit markets recorded in the past few years. Record high levels of capital available to fund managers, as well as continued strong fundraising, means that there is a lot of capital ready to be put to work, and activity is likely to be correspondingly strong.
Preqin’s most recent surveys also suggest that most GPs expect exit activity to maintain or increase.
Investor enthusiasm for the private equity asset class remains as strong as ever, and fund managers will be hopeful that they can navigate a congested deal-side market to find opportunities that offer good value for money.