This year is shaping up to be the best for PE exits and fundraising since the crisis, says Antoine Dréan, the firm’s founder and chairman, in the latest issue of The Triago Quarterly. “Over 2000 GPs are currently aiming to raise in excess of $800 billion – 2.3 times our 2013 fundraising forecast,” Dréan says in the report.
Through June, global fundraising hit $178 billion and is on pace for a full year total of $356 billion, Triago says. The $356 billion is set to be the largest sum raised since 2008, the placement agent says.
Triago’s projection comes after several very large funds closed this year. In May, Warburg Pincus raised $11.2 billion with its latest
buyout private equity fund, while Silver Lake, in April, collected $10.3 billion for its latest large-cap technology investment pool. CVC Capital Partners, this month, also raised 10.5 billion euros ($13.8 billion) for its latest buyout fund.
Here’s more insight from The Triago Quarterly:
- PE exits in Q2 notched their second best three-month period ever, raising almost $100 billion, Triago says. During the first half of 2013, LPs received distributions equal to 6% of capital committed to PE funds, while calls to finance new investments amounted to 4% of committed capital, Triago says. The firm expects the exit pace to continue, with distributions on track to hit 12% for the year.
- The average fund size this year increased 9% to a record $643 million.
- Private equity M&A is slow despite an estimated $145 billion in unspent PE commitments set for rolling 12-month expiry this year. Triago, which has spoken to GPs, says the uncertain global economic outlook is causing the lackluster merger market. Owners are also opting for cheap financing over sales, or selling via the IPO market.
- PE purchase multiples have also dropped. The average purchase price paid by PE firms fell from 9.2x EBITDA to 7.8x EBITDA between the fourth quarter and second quarter, says Triago, citing data from Standard & Poor’s Leveraged Commentary & Data. However, the drop is not representative of cheaper prices, Triago says. Instead, it’s evidence of failed negotiations in the large deal category where prices are higher than smaller transactions. “A surprising number of funds are not spending money in the face of high prices, despite a record level of unused PE fund commitments set for expiration this year. The number of buyouts in the second quarter was the lowest in three years,” Triago says.
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