Private equity GPs keep looking for the exits, Co-investment activity hits records, Great Hill completes VersaPay buyout

A new study shows that private equity exits slowed down last year and Great Hill completes its VersaPay buyout.

Happy Monday!

Hope you had a great weekend.

We have some numbers from the Bain & Co’s annual Global Private Equity Report..

Private equity exit activity slowed last year even as GPs continued to look for exits while being careful in making new investments in the high-priced market. Exit values dropped slightly to $405 billion on 1,078 exits, the lowest exit count since 2012, the report said.

Exits to strategic buyers remained the biggest outlet for GPs, the report said, with corporations seeking to build scale or add new products or geographies. Sponsor-to-sponsor activity came next and public offerings took only a small share of total exits last year. The report found that more than 70 percent of PE-led IPOs “significantly underperformed” their benchmark public indices.

As exit activity stayed strong, hold periods dropped to 4.3 years, well below the averge six-year hold recorded in 2014, the report said. (This despite increasing appetite on the part of GPs to find ways to hold certain, treasured assets longer through various structures. See our story here).

Valuation: Deal values in 2019 came in around $551 billion on 3,600 transactions, the report said. Deal value was down from 2018, when it hit $607 billion. These numbers don’t come close to the heady days of 2006 and 2007, when deal values hit $804 billion and $780 billion, respectively.

More than 75 percent of total transactions were deals with debt multiples higher than 6x EBITDA, way up from the years after the financial crisis, when such deals represented only about 25 percent of total transaction activity, the report said.

The average multiple of enterprise value to EBITDA for an LBO reached 11.5x in US and 10.9x in Europe, with more than 55 percent of US buyout deals with higher than 11x, the report said.
Fundraising: Deal activity was driven by continuation inflows of capital into the industry. Fundraising is as strong as it’s ever been, with $894 billion raised for private capital in 2019, the report said.

Buyout managers raised $361 billion last year. Meanwhile, dry powder hit $2.5 trillion in December, with $830 billion of uncalled capital in buyouts, more than half of which is in North America.
Around 70 percent of buyout funds hit target in under 12 months, with the average time to fundraising close at 10.5 months, the report said.

Co-investments: Limited partners have greater appetite than ever to invest directly into assets alongside their GPs. Co-sponsorship deals represented 10 percent of buyouts total value last year, setting a new record, the report said. More than 45 percent of GPs plan to offer more co-investment opportunities this year as a way to deep relationships with certain big institutions and to be able to take on larger deals, the report said.

Top Scoops
Digital transformation is taking hold of businesses in the supply chain sector. And with that, more growth investors continue to pour capital into the market. Just in the past year we’ve seen a few prominent tech investors bet on supply chain companies, writes Milana Vinn on PE Hub. Check it out here.

Great Hill Partners closed its previously announced take-private of VersaPay, a Toronto-based fintech company. Read our news brief here on PE Hub.

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