Q3 2018 saw 3,894 venture capital-backed deals announced worth a total of USD69 billion, according to data released by Preqin. This brings total year-to-date deal making to USD195 billion, meaning that the first three quarters of 2018 have already surpassed 2017’s full-year record of USD189 billion in venture capital deals.
Private equity deals meanwhile saw something of a slow-down with 1,205 private equity-backed buyout deals announced in Q3, worth a combined USD93 billion. Preqin expects these figures to rise by up to 5 per cent as more information becomes available, but nonetheless the quarter seems unlikely to match the USD129 billion announced through 1,274 deals in Q2.
Private equity buy-out seals made in North America accounted for the largest proportion of activity, with 637 deals announced worth USD51 billion. Although public-to-private deals accounted for just 1 per cent of deals announced in the quarter, these deals made up 13 per cent of deal value. This is predominantly due to two large public-to-private deals, including the largest deal announced this quarter: the USD6.9 billion acquisition of Dun & Bradstreet, by a consortium of investors.
VC deals in Greater China and in North America meanwhile were neck-and-neck, while deals in Europe trailed. However, deals made in China dominated the largest transactions of the quarter: six of the 10 largest deals announced in Q3 were in China, with two deals in the top 10 made in the US. The largest venture capital deal announced this quarter was the acquisition of Hangzhou Mouth Phase Communication Network Technology Co., Ltd. by the goliaths Alibaba Group and Softbank. Exit activity, on the other hand, drew back from Q2 levels. A total of 280 venture capital-backed exits were made for a combined USD31 billion – although this is down from Q2’s record USD72 billion total, it is in line with previous quarters.
Christopher Elvin, Head of Private Equity at Preqin, says: “Although Q3 private equity-backed buyout deal activity has slowed, it is still well ahead of where it was at the same point last year, and 2018 seems on track to surpass 2017’s full-year total. Both of the first two quarters of 2018 saw total deal value surpass the USD120 billion mark, and Q3 deal values are approaching USD100 billion. The pickup in exit activity is also encouraging: the past six months have seen both the number and the value of exits rebound to 2016 levels, after a slump through much of last year.
“After a bumper Q2 which saw a record-breaking USD74 billion in venture capital deals, Q3 2018 has slowed slightly, but it has still seen extremely strong levels of activity. In fact, the first three quarters of 2018 have already broken 2017’s full-year record, as 2018 has already seen USD195 billion in deal value. This is largely due to the rise of multi-billion-dollar funding rounds like those for Hangzhou Mouth and Grab in this quarter, but is also because deal pricing has been higher across the board. It is no coincidence that this year has seen average deal sizes rise at almost all funding stages from seed investments onwards. Ultimately, with the year already having broken records, the only real question remaining going into Q4 is how high it can go.”
