Private equity dealmakers in the US have focused on smaller and add-on acquisitions so far this year, pushed by high valuations and mega deals driving competition in the upper-end of the market, according to PwC.
The accounting and consulting firm said in a report titled “The Golden Era of M&A” that 60 percent of private equity deals from January to November were add-on acquisitions, and half of all deals were transactions valued at maximum $25 million.
Smaller deals meant that private equity represented only 8 percent of total US deal value in the period, at $171 billion. However, deal-making was prolific, keeping up with two years of strong US mergers and acquisitions activity. PwC noted that private equity deal volume held steady at 18 percent, with 1,905 transactions.
The report also remarked on a slowdown of initial public offerings (IPOs), citing market volatility as the main reason. There were 195 IPOs across the board, totaling $33.2 billion, 60 percent lower in value than 2014. As investors familiarise themselves with what the report called a “normal” level of market volatility, it expected IPOs to pick up pace.
Next year, PwC believed private equity would find distressed opportunities in energy, and a growing number of funds would target opportunities in technology that will fuel deal flow.
Accel-KKR, a tech-investing fund, closed its fifth buyout fund on $1.3 billion in September to focus on buyouts of small-cap and mid-market software services companies. Also, a California-based software investment firm called Battery Ventures promoted two investment professionals in October to further expand its tech investing activities, as reported by Private Equity International.
The report also anticipated that the industry will focus on alternative ways to deploy capital, as reflected in recent trends reported by PEI regarding fundless sponsors and booming levels of shadow capital. These alternatives will facilitate a transition beyond traditional buyouts, it said.