US private equity deals insights: Q4 2019

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Low interest rates, abundant dry powder fuel deal activity

Private equity (PE) investors continued to focus on technology and health care during the fourth quarter of 2019. Interest in the two sectors will likely carry over into 2020 as PE firms seek out investments that can disrupt traditional business models.

We expect that a variety of forces will drive PE activity in 2020. Ample capital, diverse sources of financing, rock-bottom interest rates, and direct participation by sovereign wealth funds will likely sustain a robust market. We expect that the availability of capital will buoy activity during the next slowdown.


“We saw record PE fundraising in 2019, with mega PEs and tech-focused PEs attracting the lion’s share of capital.”

Andrew Cristinzio, US Private Equity Leader

Trends and highlights

  • Mega-funds dominated the PE space in 2019, pushing up fundraising to $301 billion for a 52% gain compared with 2018. Technology-focused PE attracted almost 25% of the total fundraising.
  • Deal activity was resilient but below the level of 2018 largely because of policy uncertainty and fears of a downturn. Disclosed deal value fell 7.2% to $677.9 billion compared with 2018. Deal volume declined 4% to 5,133.
  • The number of exits slumped to 1,035—the lowest level since the total of 920 in 2011—because of elevated multiples and the weakest IPO market since 2012. The secondary market (PE to PE) has become the most popular exit strategy, representing 40% of PE exits, thanks to the high level of available capital. Holding periods have lengthened and we expect that trend to continue.

Highlights of deal activity


Private equity sub-sector analysis

  • Deal activity among PE firms was robust during the fourth quarter, with 1,277 transactions. Deals with disclosed value reached $179.6 billion.
  • The technology and health care sectors are at the forefront of dealmaking. The share of PE deals focused on technology rose from less than 10% five years ago to more than 17% in 2019. The two sectors would likely hold up comparatively well in a downturn so they may gain more interest from PE firms in coming quarters, despite their higher valuations.
  • Stock market gains during Q4 bolstered the high valuations among private companies. The difference between stock market valuation and private companies valuation—a ratio of about 14 to 11—will probably support private equity investment and may spur increased IPO activity in the near future. While Tech PE investment valuations have risen, our proprietary models indicate that valuations of other sectors may be trending down more significantly than the data might suggest.
  • Many firms may struggle to meet earnings targets and may postpone exits as a result. Some investors have held back because of lofty valuations, gridlock in federal fiscal policy, and high-profile setbacks such as the failed WeWork IPO. Firms completed only 23 IPO exits during all of 2019, or about half the number of the prior year.

Private Equity deals outlook: abundant capital will drive activity...

  • Record level of dry powder. US managers in December held $1.4 trillion in dry powder, $800 billion of which is PE/VC, according to Preqin. They will be inclined to put this capital to work.
  • Access to debt. Interest rates are expected to stay near a record low for a sustained period. PE investors will probably continue to enjoy greater flexibility with leveraged loans and other financing alternatives to traditional bonds.
  • Variety of funds. The rise in direct SWF investments, greater openness to longer term holding periods, and rising demand for various types of return/risk profiles will probably spur PE deal activity in 2020.
  • Gathering capital. Fundraising will probably remain strong but fall short of the level in 2019, when several mega-funds closed. Investors still seek alpha while PE firms, anticipating economic headwinds, will try to raise cash without delay.

…but PEs will act cautiously while facing several uncertainties

  • Economic outlook. A slowdown is coming, but when? Will it be mild or severe? Any indication of a deep and sudden downturn would quickly dampen deal activity.
  • High prices. A booming stock market would sustain high valuations and probably inhibit PE dealmaking. On the other hand, private equity firms may jump at any opportunities if valuations decline.
  • Uneven impact. A downturn would jar sectors such as technology and health care less than others. PE investors in 2020 will probably continue to buffer against downside risks by overweighting these sectors.
  • Election 2020. Some PE firms may take a defensive approach depending on who is nominated to run in the November presidential election.

Smart deal makers are perceptive enough to see value others have missed, flexible enough to adjust for the unexpected, aggressive enough to win favorable terms in a competitive environment, and circumspect enough to envision the challenges they will face from the moment the contract is signed. But in a business environment where information can quickly overwhelm, the smartest deal makers look to experienced advisors to help them fashion a deal that works.

PwC’s Deals group can advise private equity firms on key M&A decisions, from identifying acquisition or divestiture candidates and performing detailed buy-side diligence, to developing strategies for capturing post-deal profits and exiting a deal through a sale, carve-out, or IPO. With more than 9,800 deal professionals in 75 countries, we can deploy seasoned teams that combine deep sector skills with local market knowledge virtually anywhere and everywhere your company operates or executes transactions.

Although every deal is unique, most will benefit from the broad experience we bring to delivering strategic M&A advice, due diligence, and transaction structuring, M&A tax, merger integration, valuation, and post-deal services.

In short, we offer integrated solutions, tailored to your particular deal situation and designed to help you extract peak value within your risk profile. Whether your focus is deploying capital through an acquisition or joint venture, raising capital through an IPO or private placement, or harvesting an investment through the divestiture process, we can help.

For more information about M&A and related services to private equity, visit our homepage.

About the data

The information presented in this report is an analysis of deals in the private equity industry where the target company and/or the target ultimate parent company was located in the United States of America. Deal information was sourced from PitchBook Data, Inc.

Contact us

Andrew Cristinzio

Private Equity Leader, PwC US

Scott Gehsmann

Private Equity Assurance Leader, PwC US

Puneet Arora

Private Equity Tax Leader, PwC US

Eric Janson

Private Equity Advisory Leader, PwC US

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