At the beginning of the year, we laid out predictions for private equity dealmaking in North America, Europe and Asia. The overarching theme was that processes which stalled in 2020 would come back to life. That turned out to be quite the understatement.
The value of deals rose to $539 billion, a record for a six-month period, which puts the industry on track for its first trillion-dollar year, according to Bain & Co’s 2021 H1 Global PE Market Update.
“It’s a dog fight,” Partners Group chief executive David Layton said on a recent call about dealmaking in the first half of the year. Firms must “differentiate themselves with the amount of pre-work they are doing”.
Looking back at our predictions, we were also right to expect the return of mega-deals. June saw Blackstone, Carlyle Group, Hellman & Friedman and GIC team up to acquire Illinois-based healthcare supplier Medline in a deal The Wall Street Journal reported to be worth more than $30 billion – the biggest leveraged buyout since the GFC. In fact, the first half saw seven mega-deals valued at $10 billion or more, which was the biggest number for a six-month period, according to Dealogic.
Technology has been one of the main drivers of dealflow this year, with one in every three buyouts being a tech deal. The pandemic has been a huge driver of capital deployment in tech and healthcare, and we expect demand for all things tech to remain strong for the foreseeable future.
As the appetite for PE picks up amid huge stockpiles of dry powder and cheap debt, “the possibility of doing larger deals is now rearing its head”, Hugh MacArthur, global head of PE for Bain & Co, told us in an interview. About 90 percent of LPs plan to maintain or increase their allocation to the asset class in the next 12 months, according to their report.
While deals have surged, so have exits of PE-backed companies through the public markets, as we predicted. The value of PE-backed IPOs hit a record of about $90 billion in H1, up from $81 billion in the same period last year, while exits via SPACs (special purpose acquisition companies) also totalled around $84 billion, up from $40 billion in H1 2020, Bain & Co reports.
High-profile listings this year include Indonesian tech giants Tokopedia and Gojek, which are merging and seeking dual listings in New York and Jakarta. KKR, Temasek, Warburg Pincus and STIC Investments are backers of the companies.
“It’s a good time to exit, but a very difficult time to invest,” said one veteran European manager. Global buyout-backed exit value has risen substantially across all deal types and is on pace to reach $976 billion by year-end, an almost 120 percent jump from full-year 2020 figures.