Private equity deal value hits $1.1 trillion, smashing previous record

Mar 28, 2022 | News | 0 comments

2021 was a record-breaking year for private equity deal value, according to research from Bain & Company. In 2021, global buyout deal value ended the year at $1.1 trillion, double 2020’s total of $577bn and shattering the old record of $804bn set back in 2006 during the exuberant run-up to the global financial crisis.

Around one in three deals last year involved a technology company (which also includes the software and solutions segment).

Counting the growing number of tech-driven sectors, like fintech and healthech, where outperformance is increasingly a function of technology expertise, the share of technology could represent around half of all deal value.

The number of mega deals ($1 billion-plus) roughly doubled, helping increase average deal size by 57%, pushing it past the $1 billion threshold for the first time since Bain & Company has been tracking the data in 2000.

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As a result of the private equity deal boom, the share of private equity in the total M&A market increased to around 19%, its highest level since 2006.

Deal drivers

According to Bain’s analysis, the stunning increase in 2021’s private equity deal value owes to a number of factors.

  • The first: 2021 saw a large number of catch-up deals – those planned to close in 2020, but postponed to last year due to the Covid-19 crisis.
  • The pandemic meanwhile created a burst of activity in two sectors: technology and healthcare & life sciences, which lifted overall deal activity. Third, the amount of capital available at private equity firms (‘dry powder’) reached another record ($3.4 trillion) – pressuring investors to put that money to work.
    Raising funds
  • In a year marked by new records set, private market fund-raising didn’t disappoint, finds Bain & Company’s report. Global funds raised across the full private capital spectrum hit $1.2 trillion, a 14% increase from the 2020 total and the highest level ever reached.
  • Buyout funds raised $387 billion in 2021, their second-best year ever. But growth, venture, and infrastructure all grew faster relative to their five-year averages.
    North America, particularly the United States, remains the world’s largest market for raising equity funds

2022 outlook

Commenting on the outlook for 2021, Hugh MacArthur, global head of Bain & Company’s Private Equity practice said: “2022 will continue to be a busy and exciting time for the private equity industry.”

“But given the high prices being paid for acquisitions, there will inevitably be an increase in pressure on deal sponsors to deliver results this year. For dealmakers, it is critical that they fully understand the microeconomics of the sector, the value creation levers available to pull and the risks they’re under writing.”
In addition, MacArthur advises dealmakers to keep a close eye on the impacts of the Ukraine crisis. “The Ukraine conflict adds many dimensions to the global macro picture. Ripple effects from the Ukraine conflict will be felt far and wide. So private equity investors and their portfolio companies will need to plan for a wider-than-normal range of scenarios and watch closely as events continue to unfold.”

Source: Consultancy UK 

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