Private Equity Deals Decline
Monday, January 09, 2012

Preqin’s quarterly deal flow data shows that there were 624 private equity-backed buyout deals in Q4 2011, valued at a total of USD56.7bn – an 8% decrease from Q3 2011.

Q4 2011 saw 212 exits valued at USD41.2bn, representing a 27% fall from the USD56.3bn of exits in Q3 2011. However deal and exit flow are up 18% and 33% respectively as a whole in 2011 compared to 2010, according to the data.

The 624 deals valued at a total of USD56.7bn in Q4 2011 also represents a lower level of activity than in the same period last year, which saw 703 deals with a total value of USD69.1bn.

The total number and aggregate value of deals in 2011 were 12% and 18% higher respectively than in 2010, increasing from 2,450 deals valued at USD218.4bn, to 2,751 deals valued at USD258.2bn.

The aggregate value of deals in North America increased slightly from USD28.4bn in Q3 2011 to USD29.5bn in Q4 2011. In 2011 as a whole, there were 1,469 deals in North America valued at USD122.7bn, up from 1,264 deals valued at USD117.6bn in 2010.

At USD15.6bn, the aggregate value of deals in Europe in Q4 2011 was 37% lower than the USD24.9bn recorded in Q3, and less than half the USD33bn seen in Q2. Aggregate deal value in 2011 as a whole was USD95.4bn, a 34% increase on the USD71.4bn seen in 2010. The number of deals in the region also increased by 7%.

The aggregate value of deals in Asia and Rest of the World was USD11.6bn in Q4 2011, 43% higher than the USD8.1bn seen in Q3 2011. In 2011, the aggregate deal value increased by 36% to USD39.9bn, up from USD29.4bn in 2010.

Leveraged buyout deals represented 40% of the total number of deals in 2011, down from 47% in 2010, but accounted for 56% of aggregate deal value, up from 53% in 2010. The proportion of growth capital deals fell from 20% in 2010 to 14% in 2011, but the fall in their share of aggregate deal value was less pronounced (7% in 2010 vs. 6% in 2011). The proportion of add-on deals increased significantly, from 23% in 2010 to 36% in 2011. As a proportion of aggregate value, they increased their share from 7% to 13%.

In 2011, deals valued at less than USD100mn accounted for 55% of the total number of deals. Deals valued at over USD1bn represented 47% of the aggregate value of deals in 2011. A quarter of the total number of deals and a fifth of the global aggregate value were in the industrials sector.

"Due to the prevailing uncertainty surrounding the European sovereign debt crisis and its impact on global credit conditions, Q4 2011 has seen a slowdown in PE-backed deal and exit flow, with decreases of 8% and 33% respectively from Q3, representing the second successive quarter of declining deal and exit flow," said Preqin's Manuel Carvalho, Manager, Private Equity Deals. "Interestingly, the fall in deal activity in Q4 2011 was primarily caused by the decrease in Europe, the only region to register a fall in aggregate deal value, which was down by 37% from Q3."

"It is likely that deal and exit flow will continue to be subdued in coming months, with tightening credit conditions and a reluctance from fund managers to invest in the current climate leading to a slowdown in activity," Carvalho continued. "However, it is important to note that despite this decline in Q4 2011, deal and exit flow in 2011 surpassed the previous year, including a post-Lehman high for deal flow and an all-time high for exit activity in Q2 2011, as private equity firms began to exit some of their investments made during the buyout boom-era of 2005-2007. This indicates that if confidence returns to the wider financial markets in 2012, we may witness a return to this level of activity again."