Executive Summary
Private Equity
Despite record fundraising levels by PE firms in the U.S., M&A deal volume is down 11% in the first three quarters of 2017 compared to the first three quarters of 2016 as pricing remains high and the number of targets dwindles. With pricing high, adds-on continue to comprise a larger portion of buyouts relative to 2013 to 2015. In addition, PE firms are holding on to portfolio companies longer, with the proportion of portfolio company inventory acquired more than five years ago increasing to 38% in 3Q17, which is the highest level recorded in Pitchbook’s dataset.
Leverage Lending
Through October 2017, U.S. leverage loan issuance reached $1.07 trillion, which is 53% higher compared to the previous year, with the increase in volume largely attributable to a high level of refinance activity, which in turn has been supported by an increase in leverage loans distributed to institutional investors. Refinancing activity accounted for 67% of institutional volume compared to 49% in the prior year.
Venture Capital
Although 3Q17 looked underwhelming in comparison to a promising second quarter, year-to-date VC funding of $61.4 billion nearly matched the level of capital deployed in each of the first three quarters of 2015. However, the concentration of funding in fewer startups continued. The number of VC-backed deals in the first three quarters was nearly a third lower than in 2015.
The number of exits increased slightly in the third quarter but may not be enough to signal a reverse from the nearly three year decline. Later funding rounds continue as older, larger startups remain private and seek additional investment capital. As the market experiments with SPACs and ICOs, the rise of alternative exit vehicles could provide new routes to liquidity.
FEATURE ARTICLE
Fairness When the Price May Not Feel “Right”
Also in This Issue
Updated Metrics for
Private Credit and Equity
Publicly Traded Private Credit
Venture Capital