U.S. private equity deal volume falls 8 percent

Private equity M&A slowed down this year while U.S. mergers benefited from several large deals.

The number of announced U.S. PE deals dropped nearly 8 percent to 278 as of June 11, according to data from Thomson Reuters. Valuations, meanwhile, have plunged by more than half to $20.7 billion from the $45.7 billion produced last year for the same time period, Thomson Reuters said.

General U.S. M&A, in contrast, has surged in terms of value. The number of U.S. mergers fell slightly to 4,371 from 4,477, Thomson Reuters said. More importantly, valuations rocketed nearly 46 percent to $802.5 billion from about $548.7 billion.

Why the difference? Private equity M&A has suffered this year from high prices. Many buyers have chosen to sit out auctions because companies are too expensive, sources have said. For example, private equity was expected to dominate the auction of Russell Investments. The unit’s high price tag, $1.5 billion, is considered too expensive for private equity.

PE deals have also tapered down as the sector hits the summer months, which is typically a slower time for mergers, sources said.

April and May were “pretty busy” for private equity deals, but June seems “slow,” one PE executive said. “This seems normal for August but we’re not in August yet. This is early,” the source said.

A second PE exec said PE M&A is “slow but picking up.”

Several big deals helped pump up valuations for general M&A. Charter Communication’s $78.4 billion buy of Time Warner Cable is the largest U.S. deal so far this year, Thomson Reuters said. H.J. Heinz’s $54.7 billion acquisition of Kraft Foods Group came in second, while Teva Pharmaceuticals Industries‘s $46.3 billion buy of Mylan NV ranked third.

The largest U.S. PE deal so far this year is much smaller. The honor goes to Informatica, which is being bought by Permira Funds and the Canada Pension Plan Investment Board for about $5.3 billion. Coming in second is Leonard Green & Partners’ and TPG Capital’s $4 billion buy of Life Time Fitness.

The third-largest U.S. PE deal this year is the purchase of GE‘s real estate assets for $23 billion by Blackstone Group and Wells Fargo & Co. The sale is comprised of five to six separate transactions, Bloomberg News reported. Blackstone is buying GE’s U.S. holdings, mainly office buildings in Southern California, Seattle and Chicago, for $3.3 billion, Bloomerg said. This transaction is ranked as the third biggest U.S. PE deal this year, Thomson Reuters said.

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