Executive Summary
Private Equity
According to PitchBook total U.S.-based private equity activity in 2017 was relatively consistent with 2016, despite record-breaking levels of available capital. PE firms invested a total of $538 billion across 4,053 deals in 2017 in spite of high pricing and an alleged lack of quality targets. The median M&A EBITDA multiple was flattish for large deals at 10.5x (vs. higher for middle market and small deals); however, median leverage employed increased to 54% from 50% in 2016. The number of PE-backed companies in the U.S. climbed to 7,250, in part because exit volume fell 11% in 2017.
Leverage Lending
According to Thomson Reuters leverage loan issuance soared to a record $1.4 trillion in 2017, up 60% from 2016 and 24% higher than the previous peak of $1.1 trillion in 2013. The uptick in activity was driven by investor demand for yield as capital returned to the sector following a rout during 4Q15-1H16 when credit spreads widen dramatically. As a result, refinancing volumes surged to $933 billion. Institutional investors accounted for two-thirds of the market in 2017, while just one-third of originated credits were retained by banks. During 2016 banks accounted for a larger share of a smaller market because institutional investors grappled with redemptions.
Venture Capital
4Q17 further emphasized a growing divide in startup funding with larger ventures attracting capital while smaller ventures struggled because investors were less enamored with new opportunities and instead focused on exit strategies. More capital was deployed than any other quarter in the past decade (as was the case for the full year), but it went to the fewest deals of any quarter in the past five years. Exit activity was muted in 2017; however, a prospective increase in IPOs in 2018 may result in returned capital being recycled into new ventures.
FEATURE ARTICLE
Corporate Venture Capital and ASU 2016-01
Also in This Issue
Updated Metrics for
Private Credit and Equity
Publicly Traded Private Credit
Venture Capital