PE Activity Moderate Despite Billions in Dry Powder; Bain


March 15, 2012

Bain’s latest annual PE study offered comprehensive analysis of 2011 deal activity, returns, and trends in PE from. Two roundups key points from other journalists are provided below, followed by DealMarket Digest’s editor’s summary of the key points. You can find the report here.


Asian VC Journal: The number of large companies in a country, not the size of its economy, is the most important indicator of a market’s capacity to absorb PE. Other key factors include the depth and liquidity of capital markets, protection of investor rights, the strength of the legal system and the availability of debt financing.


PE Hub: Mega-deals are unlikely to return any time soon. The middle market is crowded with a big overhang. Exit activity fell off after one quarter had highs not seen since ’07.

Key points

Nearly $1 Trillion in “Dry Powder”, about half ear-marked for buyouts is spread out over PE firms of all sizes and types globally. Many older funds had substantial dry powder in 2011 (see graphic above, sourced from the report).

Full-year investment numbers “mask a pivotal turn in the PE market recovery” (a downward turn) in the second half of 2011

Sponsor-to-sponsor deals continued to be popular; in US, buyouts of private companies and public-to-private deals increased.

Deal size remained concentrated in the middle market

The ready availability of relatively low-cost credit made it possible for PE funds to secure financing on better terms for a wider range of companies than in 2010, when generally only high-quality transactions got financed.

Exit activity declined at the end of the year, as did fundraising success ratios.

Not only closing fundraisings but closing deals is hard. Valuations for target companies are quite high due to competition from strategics.

China is the only country in emerging Asia providing meaningful liquidity mainly via IPOs

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