2018 was another strong year for private equity buyout activity, sustained by a combination of low interest rates, largely supportive credit markets and record levels of dry powder to deploy. At the same time, PE firms faced increasing competition from cash-rich corporates, driving up multiples and requiring firms to be more thoughtful and creative in their deal thesis.
Recent market volatility and global political uncertainty indicate challenges ahead, however, the abundance of capital means that firms willing to take a view and move quickly and with conviction will continue to find opportunities.
The continued availability of cheap financing and an abundance of dry powder propelled US private equity activity to record deal volumes in 2018.
For the first time in history, over 5,000 buyouts were closed—representing 11% growth over 2017. This increase was partially driven by private equity firms successfully utilizing the buy-and-build strategy, with over 50% of deals being smaller-sized, bolt-on acquisitions.
Deal value is expected to exceed $800bn for only the second time in history after 2007, an increase of 32% compared to 2017. This growth is a direct result of intense competition and multiples being inflated as PE firms increasingly target faster-growing companies. Deal value in Q4’18 of $280bn was the highest quarter on record, resulting from the closure of several mega deals, including Blackstone’s $17bn 55% buyout of Thomson Reuters Financial & Risk Business.
“In 2018, PE firms continued to develop innovative strategies in order to successfully deploy capital in a highly competitive M&A market. In 2019 and beyond we see technology increasingly being used as a differentiator in deal sourcing, diligence and driving portfolio company performance”.
Private Equity Leader, PwC US
Tel: +1 (703) 918 1474
Private Equity Assurance Leader, PwC US
Tel: +1 (646) 471 8310
Private Equity Tax Leader, PwC US
Tel: +1 (646) 471 1691
Private Equity Advisory Leader, PwC US
Tel: +1 (214) 754 4560