Where Has Private Equity Gone?

I received an email earlier today from someone asking “Where has private equity gone? It seems that deal-flow has slowed just as we expected an onslaught of deals.”

The reader and I share mutual expectations, but a different premise: I also expect that buyout volume will increase, but my research shows that the uptick already has revealed itself.

In terms of expectations, it’s almost a sure bet that 2007 will represent yet another record-breaking year for buyout transactions (which is what I assume the emailer was referring to). After all, there is simply too much existing fund capital and LP interest to conclude otherwise. This might seem to contradict my post from last week, but those factors – public shareholder pushback and strategic competition – will only impact the mega-dealers in 2007. Most smaller firms won’t feel the downstream impact until next year.

So onto the premise: The notion that deal-flow has slowed in early 2007. It’s simply not true.

There were 87 buyout deals either announced or completed from 1/2/06-1/289/06 in 2006, according to a search of old PE Week Wire issues. There were 114 buyout deals for the same period this year. In other words, a 31% increase in 2007.

It’s true that “Merger Mondays” haven’t had the same type of buzz so far in 2007 as in the waning weeks of 2006, but that’s nothing new. Buyers, sellers, bankers and lawyers all try to get old business wrapped up before the holiday season, which generally results in a late Q4 bump. The more accurate comparison is of similar time periods and, by that measure, private equity hasn’t gone anywhere in 2007.