Private equity deals insights: Q3 2018

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Executive summary

In the first three quarters of 2018, 3,501 deals worth $508.8 billion closed, representing an increase of 2.1% and 3.4%, respectively, over the same period in 2017.

A number of mega-deals were completed this quarter that helped drive deal value – the largest being the acquisition of Dr Pepper Snapple Group by JAB Holdings and BDT Capital Partners for $21 billion.

Private equity (PE) firms continue to face increased competition for high quality assets, particularly from cash rich corporates which have benefited from the recent tax reforms. This has driven up multiples and forced private equity firms to be more aggressive on deal process or more elaborate in their investment theses to successfully deploy capital without sacrificing returns.

We therefore see carve-outs / divestitures driving the majority of deal activity as: i) private equity firms look to deploy high levels of dry powder in this competitive environment; and ii) corporations look to divest non-core assets, or are forced to sell non performing business units by activist investors.

Trends and highlights

  • Fundraising declined significantly in 2018, with most of the larger funds completing fundraising during 2017. While fewer funds have closed in 2018, the average fund size is also declining –reducing from $973.5 million in 2017 to $855.2 million in YTD18, representing the first decline since 2015, according to PitchBook.
  • While interest rates continue to increase from a sustained period of record lows, the debt market remains favorable as lenders seek attractive returns. This has resulted in limited or no covenants associated with acquisition facilities and significantly oversubscribed debt syndications for larger deals.
  • With multiples elevated, investors continue to leverage platform businesses through add-on transactions which accounted for approximately two thirds of buyouts. An example is the recent acquisition of Pomeroy by Getronics’ for $815 million, which closed in 3Q.

“Private equity firms will need to focus on positioning themselves in a deal early-on with a specific angle, be able to execute quickly, and show increased discipline to successfully deploy capital without sacrificing returns.”

Andrew Cristinzio, US Private Equity Sector Leader

Contact us

Andrew Cristinzio

Private Equity Leader, PwC US

Tel: +1 (703) 918 1474

Scott Gehsmann

US Private Equity Assurance Leader, PwC US

Tel: +1 (646) 471 8310

Puneet Arora

Private Equity Tax Leader, PwC US

Tel: +1 (646) 471 1691

Eric Janson

Private Equity Advisory Leader, PwC US

Tel: +1 (214) 754 4560