Private Equity Deals Hit New Record

2018 saw a record number of private equity deals, including the $17.0 billion buyout of the financial and risk business of Thomson Reuters

PitchBook 15 January, 2019 | 11:59AM
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Deal making

While stock markets struggled last year, the US private equity industry closed a record 5,050 deals, a rise of 32% on the previous year. These deals were worth $803.5 billion, 11% above 2017 levels, and the second best year for deal value on record. 

The fourth quarter saw the highest quarterly deal value on record at $282.7 billion. In the last three months of the year, several mega-deals of $1 billion+ closed, including the $17.0 billion buyout of 55.0% of the financial and risk business of Thomson Reuters, renamed Refinitiv. Through this buyout, Blackstone will attempt to invigorate the financial data and analytics business and to take share in a notoriously competitive market.

While Refinitiv was likely the most discussed buyout of the year, the $21.0 billion buyout of Dr Pepper Snapple by BDT Capital Partners and JAB Holding was the largest deal to close in 2018. 

As competition is rising and PE firms are acquiring a record number of companies, multiples are being further inflated due to PE firms increasingly targeting faster growing companies.

During much of the year, PE firms enjoyed continued easy access to affordable debt financing with favourable terms. However, after months of activity in which these loans flew off the shelves, recent months have seen a dramatic turnaround with outflows in leveraged loan funds occurring at the fastest pace ever. 

If investors begin demanding higher interest on loans and additional covenants, dealmakers may have to re-evaluate their investment theses and re-price deals.

IPO Value Highest in Four Years

Private equity-backed IPO activity neared $50.0 billion in 2018, the highest figures since 2014’s record $86.2 billion. This relatively vibrant activity is a divergence from the tumultuous year experienced in US public equity markets, which recorded the worst annual performance since the financial crisis.

Several prominent PE exits came via IPO in the year, including SolarWinds (SWI) – backed by the trio of HarbourVest, Silver Lake, and Thoma Bravo – at a $4.3 billion valuation in the fourth quarter. However, no IPO eclipsed the size of ADT Security Services (ADT), which Apollo took public on January 18 at a $9.0 billion valuation. ADT raised $1.5 billion during its public offering. Despite several notable, multi-billion-dollar IPOs, median PE-backed IPO value rose just 2.6% in 2018 to $670.9 million.

Many of the year’s largest exits occurred in the technology sector with 23 exits valued at or above $1 billion. PE-backed IPOs have accounted for a waning portion of overall US IPOs in recent years, declining in seven out of the past 10 years. This trend is likely to continue in 2019 as a herd of venture capital-backed unicorns – including Uber, Lyft, and Airbnb – gets ready to go public throughout the year. PE firms do not prefer the extended exit timeframe necessary for an IPO, which can leave investors at the mercy of public market gyrations.


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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar
ADT Inc6.36 USD-1.55
SolarWinds Corp Ordinary Shares10.91 USD-2.59

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