US private equity deals fall 25%

Private equity buyout and exit volume fell during the first half of 2013, while fundraising has risen 30%, according to a new report from Ernst & Young.

The number of US private equity acquisitions fell 25 percent to 386 during the first half of 2013, compared to 512 during the same period last year, according to new research from Ernst & Young. 

At the same time, deal values through the first six months of 2013 spiked 94 percent year-over-year, thanks primarily to a small number of multi-billion dollar acquisitions. Transactions including the $24.4 billion take-private of PC manufacturer Dell, backed by Silver Lake, helped boost combined deal values to $85.4 billion, up from $44.1 billion during the first half of 2012. Private equity exits, meanwhile, fell 29 percent, from 173 to 123.

“The run-up in the stock market has had a significant impact on valuation expectations, challenging deal activity so far this year,” Jeffrey Bunder, global private equity leader at Ernst & Young, said in a statement. “There are reassuring signs; however, as funds are sitting on $350 billion of dry powder, the demand has held up for the sale of private equity-backed businesses and the IPO market has been phenomenal from a private equity perspective.”

The strong exit environment has coincided with improving private equity fundraising in the US, as general partners raised $96.8 billion through the first six months of the year, a 38 percent increase compared to the $70 billion raised in the first half of 2012. Global fundraising is also up 30 percent year-over-year, to $186.1 billion, according to data from Private Equity International’s Research and Analytics division. Of the $186.1 billion raised, buyout strategies accounted for $89.1 billion, the highest half-year total since 2008. 

In Private Equity International’s latest Limited Partner Sentiment Survey, 93 percent of LPs planned to increase their allocation to the asset class. GPs have also expressed an optimistic outlook for fundraising in the near term, as 85 percent of private equity firms responding to Ernst and Young’s Private Equity Capital Confidence Barometer think fundraising will be “positive or stable over the next year”.