Private Equity Deals and Exits Down Amid Strong Fundraising, High Inventory

According to PitchBook, mergers and acquisitions (M&A) by private equity (PE) funds trended down in the third quarter of 2017 with an estimated 959 deals closed, valued at approximately $163 billion.

This is a subset of the overall M&A market, as this only includes deals by PE firms and excludes acquisitions by strategic buyers. For the first three quarters of the year, deal value and closings are both down 11% from the first three quarters of 2016. This comes as a surprise, as fundraising continues to be strong, and private equity “dry powder” (the capital that the funds have raised but not yet deployed) is at an estimated $556 billion. Fewer numbers of investments being made and lower aggregate deal value may be the effect of fewer quality deals on the market and less flexibility in price. ​

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Similar to trends in deal closings, PE funds reported continued slowing in exit volume (sales of their portfolio companies). PitchBook noted that, of reported exits, 46% were corporate acquisitions and 50% were for secondary buyouts, which were the lowest and highest recorded percentages, respectively, since PitchBook began tracking such data. The trend towards more secondary buyouts is expected to continue, as funds are currently disposing of long-held inventory that must be exited and holding high cash balances that must be deployed.

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