Private Equity-Backed Buyout Deals Decrease Sharply In Q1 2016 by Preqin

Deal market fails to continue momentum from record aggregate value seen in Q4 2015

The latest update from Preqin shows that the first quarter of 2016 saw 874 private equity-backed buyout deals globally, worth a combined $44bn. This represents a sharp decrease from the 962 deals in the previous quarter, which were worth a post-crisis record $137bn, and is 57% lower than the $101bn recorded across 904 deals in Q1 2015. All regions saw decreases in aggregate deal value, with North America falling from $100bn in Q4 2015 to $28bn in Q1 2016, and Asia falling from $17bn to $4.5bn in the same period. Although Preqin expects these numbers to rise by up to 20% as more information becomes available, they are significantly lower than the totals seen in recent quarters.

Private Equity-Backed Buyout

The private equity buyout-backed exit market also contracted in Q1, as 343 exits were announced globally worth a total of $62bn. The number of exits is 19% lower than the 421 exits seen in Q4 2015, and 15% lower than the 402 exits in the first quarter of last year. The aggregate value of those exits also fell, down from $72bn the previous quarter. This marks the third consecutive quarterly decline in aggregate buyout exit value since the most recent peak of $125bn seen in Q2 2015.

Private Equity-Backed Buyout

Other Key Private Equity-Backed Buyout Deals and Exit Facts:

  • Investment Type: Leveraged buyouts (LBOs) accounted for the greatest proportion of global buyout-backed deals in Q1, with 41%. However, add-ons and mergers represented the largest part of aggregate deal value in the quarter, holding a 46% stake of the global total.
  • Value Band: Buyout-backed deals worth less than $100mn accounted for 59% of the total number of deals in Q1, up six percentage points from the previous quarter. Despite accounting for only 7% of the total number of deals, buyout-backed deals worth more than $1bn represented 56% of the total deal value.
  • Deals by Industry: Information technology deals accounted for almost half (45%) of global deal value in the quarter, up from 34% in 2015. Energy & utilities deals represented just 5% of the number of deals and 10% of aggregate deal value.
  • Largest Deals: The largest private equity-backed buyout deal announced in Q1 2016 was the $15bn merger of ADT Security Services, Inc. with ASG Security and Protection 1, owned by Apollo Global Management. Apollo participated in three of the ten largest deals in the quarter.
  • Exits by Type: Trade sales accounted for 63% of the total number of private equity buyout-backed exits in Q1, up from 51% the previous quarter. All of the ten biggest exits in the quarter were of this type.

Private Equity-Backed Buyout

Comment:

“Global private equity-backed buyout deal activity slowed noticeably in the first quarter of 2016, especially when compared to the record aggregate values seen in 2015. With public equity markets weaker than they have been in recent quarters, it is unsurprising that fund managers are exercising caution and the pace of acquisitions, particularly large-cap deals worth more than $1bn, has reduced.

Equally, the rate of exits from buyout-backed companies has been slower this quarter, with fewer companies going public as market participants take a more cautious approach. The aggregate value of exits from buyout-backed companies has seen its third consecutive quarter of decline, and the proportion of trade sales is at a long-term high.”

Christopher Elvin – Head of Private Equity Products, Preqin