PE Dealmaking Soft in 2Q: Pitchbook Report

PE investment seemed poised for a spike in 2013, but Pitchbook’s 3Q 2013 Private Equity Breakdown spells out how that hasn’t happened, at least so far this year.

“While public equity markets experienced strong gains throughout the first half of 2013, PE deal-making was at a lackluster pace in 2Q 2013, reaching a new quarterly low since the depths of the financial crisis,” Pitchbook reports. PE firms invested $71 billion across 318 deals in the second quarter, down from the 420 investments in 1Q 2013 and far off the 671 investments in 4Q 2012, where late-year activity saw $141 billion in investments.

Meantime, exits saw a “slight uptick” in the third quarter– 108 portfolio company exits totaling $17.1 billion–but that activity was still the second lowest quarterly total in the last three years.

Despite the disappointing deal-making and exit activity, healthy fundamentals including expiring dry powder, aging portfolio companies and easy access to debt, remain largely in place, the report noted. Other good news regarding fundraising in the quarter: “the $48 billion raised is the most since 1Q 2009. Furthermore, five funds closed with $5 billion or more in 1H 2013, which equals the combined total from 2011 and 2012,’ according to the report.

Deals of $100 million or less continue to account for about two-thirds of transactions through the first two quarters, attributed in part to interest in add-on opportunities.

While the Heinz buyout contributed massively to activity, it’s the smaller deals that continue to drive PE investment, according to Pitchbook.

The IT industry was the only sector seeing an increase in activity from the first quarter.

Pitchbook said the mega-sized funds are making a showing in 2013. “Discussions of a ‘shakeout’ in the PE industry have been incessant since the financial downturn, and the recent fundraising numbers suggest that this may finally be coming to fruition.” According to the report. More money is making its way into the top-performing firms, as some smaller players close down.

Access the full report on Pitchbook’s homepage.