2014 certainly felt like a bumper year for private equity exits, but new data reveals it may have been even better than the industry thought.
According to a report from PitchBook, last year an impressive 1,800 exits were completed by PE backers, generating $500 billion in proceeds.
This is a substantial increase from the $316 billion generated through 1,738 exits in 2013. The number of exits has risen steadily since 2009, from 618 to last year’s high, a pattern followed by the amount of capital generated. Until last year’s mammoth 58 percent jump, that is.
“The factors that drove this record activity across the primary exit buyout routes […] have been slowly developing for years,” PitchBook said in its report.
These include the pre-financial crisis “buyout boom” resulting in a high number of PE-backed companies, coupled with a drop in exit activity as the crisis evolved. The latter only began to pick up again from 2009 to 2010, and PE firms’ desire to sell over the following years was matched by a burgeoning appetite for M&A from corporates. An increase in capital overhang led to a surge in secondary buyouts, while low interest rates, quantitative easing and cheap debt pushed up purchase multiples.
In 2014 all three traditional private equity exit routes – corporate acquisitions, IPOs and secondary buyouts – were “wide open”, PitchBook says. As in previous years, corporate acquisitions were the most popular exit route worldwide, accounting for 52 percent of last year’s exits, but it was also a strong year for public offerings, which reached 9 percent – its highest level since 2010.
PE backers sponsored 165 IPOs worldwide in 2014 – up from 123 in 2013 and just 77 in 2012 – accounting for 44 percent of all IPOs in 2014. The percentage of IPOs coming in below target jumped to just over 27 percent, an increase of around 6 percent from 2013, and only 19.3 percent exceeded their pricing target.
Many of the factors that fuelled 2014’s exit activity will still play a role in 2015, so managers can look forward to another strong selling year.