– Fundraising Gets a Burst of Speed
– Fundraising for 1st Time Managers Hits Post-GFC High
– PE-Backed Acquisitions Fall, as General M&A Rises
– PE Firms are Getting a Smaller Slice of the Leveraged Loan Pie
– Venture Capital: European “Unicorns” are Becoming Easier to Find
“FUNDRAISING GETS A BURST OF SPEED,” writes Financial News. “The words fundraising and fast are not often found together in private equity. However, in the past 18 months, the most popular firms have raised funds so quickly that investors are struggling to keep up.” “The time taken to raise funds is contracting from an average of 18.1 months in 2013 to 15.8 months this year – but the hottest are moving much faster.” Meanwhile, “some 59 percent of the buyout funds that have reached a final close in 2015 either hit or exceeded their upper fundraising limits. Even in 2008, the last bumper fundraising year before the crisis spoiled investor appetite, the figure stood at only 34 percent.” Despite 2015’s heady headline numbers, “critically,” investors continue to concentrate their commitments with a smaller number of investors than in the past, leaving many funds struggling.
FUNDRAISING FOR FIRST-TIME MANAGERS HITS A POST-GFC HIGH. “Through May, first-time private equity managers raised $22.4 billion, a seven-year, post-global financial crisis record for the first five months of the year,” writes Palico founder Antoine Drean in a Forbes column. Citing Palico data, Drean notes that aside from an increase in market share for first time fund managers, “what is truly interesting is that nearly half of the capital earmarked for new managers in 2015 – 48 percent – is slated for deal-by-deal, co-investment and managed account structures. Before the financial crisis, the vast majority of all first-time manager capital was committed to classic 10-year commingled private equity funds, where the manager called all the shots.” Many new teams “must prove themselves today by offering investments via more flexible structures.” “Weakening top quartile persistence,” low-cost and specialization in less crowded investment areas are factors reviving interest in first-time managers, even as investors cut back on the number of traditional funds they invest in.
U.S. PE-BACKED ACQUISITIONS HAVE “DROPPED NEARLY 8 PERCENT to 278 as of June 11, reports PE Hub. Valuations “have plunged by more than half to $20.7 billion from the $45.7 billion produced last year for the same time period.” At the same time, however, general U.S. mergers and acquisitions activity “has surged,” with valuations rising nearly 46 percent year-over-year to $802.5 billion. “Why the difference? Private equity M&A has suffered this year from high prices.”
PE FIRMS ARE SEEING “A SMALLER SLICE” OF THE “LEVERAGED LOAN PIE,” according to Steve Miller, the head of S&P’s highly-respected loan-tracking operation, Leveraged Commentary & Data. “As tough as 2015 has been for leveraged loan activity overall – new issue volume in the U.S. is down 32 percent year-over-year, to $205 billion through June 12 – private equity has suffered a disproportionate drop, fostered by a combination of regulatory pressure and sky-high equity prices,” he writes in Forbes. “All told, private equity-backed issuers’ share of leveraged loan volume has receded to a six-year low of 43 percent, or $87.7 billion of $204.6 billion, from 54 percent last year.” Leveraged Buyout activity “remains far short of its boom year highs” and “few participants expect the LBO engine to shift into a higher gear until purchase price multiples fall.”
“UNICORNS” ARE BECOMING EASIER TO FIND IN EUROPE, writes the Financial Times, referring to technology startups valued at a billion dollars or more. A study from British investment banking group GP Bullhound “shows that a bumper crop of billion-dollar technology companies has been produced in the region since April 2014, with 13 groups achieving the valuation.” The numbers “point to strong growth in the region’s startup scene, which is beginning to develop mature tech groups of a size that only Silicon Valley has been able to consistently produce.” “Despite recent European gains, the data show that the U.S. still dominates the world of technolgy. Overall 22 U.S. groups have achieved billion-dollar valuations since 2014, well above the number produced in Europe.”