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North American PE-backed buyout deal flow reaches post-Lehman high in 2012

North American deal flow reached a post-Lehman high in 2012, according to data from Preqin.

This contributed to strong global deal flow recorded in 2012, with 2,866 buyout deals announced valued at USD254.6bn.

This nears the global post-2008 highs of 2011, which witnessed USD264.8bn globally from 2,900 buyout deals. Compared to 2010, global deal flow in 2012 represents a 14 per cent increase in the number and a 15 per cent rise in the value of buyout deals.

North America also witnessed a post-Lehman high in 2012 in relation to exits, with USD147.1 worth of exits taking place in the region during the year. However, global private equity-backed exit flow for 2012 stood at 1,192 exits valued at USD275.2bn, down from the 1,145 exits valued at USD310.1bn in 2011, which was the highest level since the onset of the financial crisis. Q4 2012 witnessed 304 private equity-backed exits valued at USD72.2bn, an 11 per cent increase in the number and a 2 per cent increase in the value of exits in comparison to Q3 2012.

Q4 2012 was the second strongest quarter for deal flow in North America in the post-Lehman era, with 431 buyout deals announced valued at USD41.3bn, surpassed only by the USD50.7bn in Q3 2012.

Europe, which continues to rebound from the declines in deal flow in mid-2011, saw 192 buyouts valued at USD24.5bn during Q4 2012, a 76 per cent increase in aggregate deal value compared to Q3 2012, which witnessed 194 buyouts valued at USD13.9bn, and a 69 per cent increase in deal value from the same period in 2011.

Buyout deal flow in Asia Q4 2012 dropped by almost a third in both the volume and value of deals witnessed compared to Q3 2012, with 53 buyout deals valued at an aggregate USD5.4bn in Q4 2012.

Forty three per cent of all deals in 2012 were leveraged buyouts, representing almost two-thirds of the aggregate value of deals globally during the year.

Add-on deals, which made up 18 per cent of all buyout deals pre-financial crisis, accounted for a third of all buyout deals in 2012, as private equity firms continued to consolidate current holdings.

The majority of buyouts announced in 2012 were small-cap deals, with 58 per cent of the number of deals announced in 2012 valued at less than USD100m, and 78 per cent of all deals valued at less than USD250m.

The mid-market sector accounted for 14 per cent of all deals and 28 per cent of the value of deals in 2012.

Large-cap deals valued at over USD1bn accounted for over half the aggregate value of deals globally during the year.

“Despite a difficult opening to the year due to continued turbulent market conditions, 2012 has seen the buyout deal flow approach the post-Lehman high in deal number and aggregate value witnessed during 2011,” says Anna Strumillo, manager – buyout and venture capital deals at Preqin. “In particular, North America witnessed a strong 2012, recording a post-2008 high for the year of 1,590 buyout deals valued at an aggregate USD152.3bn. In contrast, European deal levels remained low in 2012. However, the USD24.5bn of European deals announced during Q4 2012 is a 76 per cent increase from the previous quarter, an encouraging indicator for 2013.

“With buyout firms continuing to hold an estimated USD357.9bn in dry powder as of January 2013, alongside a strong North American buyout market and a rebounding European deals market, private equity fund managers remain in a strong position in the coming months to continue to deploy their capital in opportunities globally, despite continuing market challenges.”

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