Private equity and venture capital are important parts of our financial system that help corporations gain the funding they need through their own entities or through bringing a company public, through IPO. They also can help take a company private, called a buyout. These services help keep the marketplace fresh and help with advancing ideas or acquisitions. It also happens to be a very lucrative business to be in.
Private equity and venture capital industries see all time high AUM growth
According to the 2015 Preqin Global Private Equity and Venture Capital Report, the industries saw assets under management grow to a new all time high to $3.8 trillion, as of June 2014. The report’s 2014 year in review also shows that PE and VC firms saw total “dry powder” increase 11.9% to $1.2 trillion, as of December 2014. Dry powder is a term for marketable investments that are extremely liquid and hold “cash-like” properties. In essence, they could be treated as if they were cash reserves for future use.
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The 2014 summary in the report shows that aggregate capital raised by these industries totaled $495 billion during the year and capital distributions reached $444 billion in H1 2014. Looking at performance, venture capital strategies have a one year internal rate of return of 25.9%, outperforming all other strategies deployed during the period.
Turning specifically to buyout activity in 2014, the industry saw an aggregate buyout deal value of $332 billion in 2014, with 1,604 total buyouts during the year leading to an aggregate value of $428 billion. The largest buyout deal of 2014 goes to Tim Hortons’ purchase of Burger King, which totaled $11.53 billion and was backed by 3G Capital. The largest buyout exit of 2014 was the sale of Alliance Boots, which was acquired by Walgreens Boots Alliance for $15 billion.
Aggregate venture capital deal value totaled $86 billion
Looking at venture capital activity in 2014, the aggregate venture capital deal value totaled $86 billion and the largest VC deal was with Uber Technologies, who received $1.2 billion for Series D financing and $1.2 billion for Series E financing; giving the company a total of $2.4 billion in financing raised. There were 1,049 venture capital exits during 2014, totaling $120 billion. Of those exits, the largest was during the IPO of Alibaba, which totaled $25 billion for VC firms involved.
Overall, private equity raised total capital in North America of $290 billion, $131 billion in Europe, $55 billion in Asia, $4 billion in the South American region and $16 billion in the rest of the world during 2014.
The venture capital and private equity industries are certainly good barometers of overall economic health and with continued success and all time highs for various aspects of the business, it certainly shows that economic activity in 2014 was very strong. PE and VC funds have high hopes for 2015 and certainly hope that the high activity in buyouts, capital raising, etc continues in the coming year.