Bain & Company says the PE investment market had its best 6-year stretch in its history
The global private equity market saw $3.2 trillion in disclosed buyout deal value in 2019 as investors shook off fears of deteriorating macro conditions and recession.
Buyout firms attracted a record amount of capital and increased their share to 40% of total private capital, the highest on record since 2006.
Deal value last year was on par with historical averages at $551 billion, despite record high valuations and intense competition that capped the number of mega deals GPs could successfully close. Deal count was flat at roughly 3,600.
But although a record amount of capital poured into the industry with a new record of $2.5 trillion for private capital and $830 billion for buyouts alone, it was not an easy ride.
"Private equity investors had another strong year but they had to work harder than ever for their deals to be successful," said Hugh MacArthur, global head of Bain & Company's Private Equity practice. "Our research highlights a notable development in the US buyout market. For the first time, the returns of public markets and private equity have converged over a 10-year period. This raises questions about how private equity can stand out and remain attractive to investors going forward."
General partners were looking to public markets and co-investments as they broaden their hunting ground.
The most successful investors are avoiding the over-heated tech sectors and looking to sustainable growth areas with strong fundamentals. Despite tech's growth characteristics continuing to attract, the red flags are hard to ignore. But Bain & Company believes that private equity will still be able to find good opportunities in the sector.
ESG growing
And in line with much of the investment space, others are focusing on ESG investments to do well while doing good.
"GPs can no longer do without a clear ESG strategy," said MacArthur. "Impact investing has the potential to be a clear game changer. The question is whether funds can do well by doing good. It is early days, but evidence such as technology and a shift in the consumer mindset is building to support the idea that impact investing will enhance performance, not detract from it."
The full findings are in Bain & Company's 11th annual Global Private Equity Report.
Despite a somber macroeconomic outlook, global #PrivateEquity activity remained strong in 2019. https://t.co/ayRHoURezz pic.twitter.com/fTOU6gZC38
— Bain & Company (@BainAlerts) February 26, 2020
