Add-Ons Retain Commanding Share Of US Buyout Activity

Add-Ons Retain Commanding Share Of US Buyout Activity

Representing 64% of all US buyout activity through the end of September, add-ons have never before constituted such a lofty proportion of private equity investing.

Part of that is a statistical quirk. As the volume of buyouts has slid while investors generally maintained the pace of adding on, relative proportion was bound to increase. But, as noted over the past couple of years, the primary drivers for the growing add-on rate have been consistent: a competitive dealmaking environment, a shrinking supply of quality opportunities for original platform buys, and relatively costly transaction multiples.

Bonhoeffer Fund July 2022 Performance Update

Screenshot 27Bonhoeffer Fund's performance update for the month ended July 31, 2022. Q2 2022 hedge fund letters, conferences and more The Bonhoeffer Fund returned 3.5% net of fees in July, for a year-to-date return of -15.8%.   Bonhoeffer Fund, LP, is a value-oriented private investment partnership for . . . SORRY! This content is exclusively for Read More

It’s difficult to gauge how much longer this confluence of factors may persist. For one, economic growth could finally bump upward significantly if there’s a sizable shift in fiscal policy, which may very well occur in the wake of the US presidential election. That could embolden PE investors to make riskier plays predicated on at least a short period of stronger growth.

But at the same time, the quality of platform opportunities within the market isn’t simply going to surge over the next few quarters and reverse the trend toward add-ons. Within the US lower middle market, aging baby boomers looking to sell and retire may contribute to a s