– PE Firms are Being Created at a Record Rate
– U.S. VC Investment: on Track for One of its Best Years
– The Scene May be Set for a Big Increase in PE-Backed Acquisitions
– Fund Restructurings are Here to Stay
– Crunchbase’s Running Count of Past, Present and Emerging Unicorns
“PRIVATE EQUITY FIRMS ARE BEING CREATED AT A RECORD RATE,” writes Financial News. “Globally, 625 firms have either raised their first fund or reached at least their first close since the start of January.” “The last peak in launches was 2007, when there were 547 new managers. In 2014 there were 410 launches. The total number of buyout firms is now 6,647.” The unprecedented growth in new firms’ numbers “come at a time when fundraising is gaining momentum in the buyout industry. In 2013 and 2014 funds raised $541 billion and $552 billion respectively, the highest levels since the global financial crisis,” and 2015 may set a new record.
U.S. VC INVESTMENT IS ON TRACK “FOR ONE OF ITS BEST YEARS in almost two decades,” reports CNBC. “U.S. venture capitalists invested $16.3 billion in the third quarter of 2015.” That’s 5 percent less than the “$17.3 billion invested in the second quarter,” but it represents “the second highest quarter in aggregate investment dollars since the fourth quarter of 2000.” So far in 2015, venture capitalists have “pumped $47.2 billion” into investments. “That level is higher than 17 out of the last 20 years.” Retail and media companies saw their share of VC funding “tick upward” in the third quarter, while software, “the top-grossing sector,” saw investment fall 21 percent quarter-on-quarter to $5.8 billion. Late-stage investments rose “10 percent to $4.4 billion, mid-stage deals held steady, totalling $4.2 billion, while seed-stage investments “rose 23 percent.”
THE SCENE MAY BE SET FOR “A BUMPER END TO 2015” BUYOUTS, writes Bloomberg. “U.S. buyout firms snapped up $97.3 billion of assets” during the third quarter, “a 56 percent jump compared with the same period last year.” Technology deals led, “accounting for more than a fifth of the funds spent.” Notes Bill Sanders, managing director and head of financial sponsors at Morgan Stanley: “Large amounts of capital available for deals, appealing valuations, low interest rates and activists pushing for carve-outs and takeovers are driving activity.” “Recent stock market volatility may actually increase deal volumes, as companies seeking a buyer turn to PE funds that may be willing to pay higher multiples than listed strategics.” Buyout-backed deal volume is far from the $500-billion-plus annual levels achieved in 2006 and 2007, but it’s on pace to pass $300 billion for the first time since the 2008 financial crisis.
“FUND RESTRUCTURINGS ARE HERE TO STAY,” proclaims LBO Wire, citing a range of industry executives. Paul Nicum, a partner at fund-of-funds manager Adams Street Partners tells the publication: “This is just getting started. There are a number of funds that raised in 2006 and 2007 with relative mediocre performance and a lot of those funds will go through some kind of restructuring.” Adds David Atterbury, a managing director at Harbourvest Partners: “It is increasingly commonplace now for good quality” managers “to look at ways to create liquidity for their investors and it is no longer a question of waiting” for the end of the life of the fund. “The volume of PE assets that are over five years old is around $800 billion and that creates a lot of opportunities for secondaries buyers.”
TO KEEP TRACK OF UNICORNS, SEE CRUNCHBASE’S LEADERBOARD. All privately financed companies with valuations of a billion dollars or more – “unicorns” in venture capital parlance – are regularly added as they achieve this coveted status. Crunchbase currently counts 151, from herd leader Uber, the internet car service company valued at $51 billion, to 22 baby unicorns valued at $1 billion each. The companies – 99 come from the U.S. – currently have a collective value of $524.3 billion, with the equivalent of 14.8 percent of that – or $77.6 billion – raised through equity financing rounds. Crunchbase also posts the 19 former unicorns either publicly listed (13) or sold to other companies (6), as well as all 38 privately financed companies – labeled “emerging unicorns” – with values of between $500 million and $1 billion.