Private equity (PE) funds produced another impressive surge in investment value in 2018, capping the strongest five-year stretch in the industry’s history with USD2.5 trillion in disclosed buyout deal value.
Limited partners (LPs) remained highly enthusiastic and continued to flood the market with fresh capital. For general partners (GPs), putting record amounts of capital to work meant getting comfortable with a certain level of discomfort when investing. They were paying prices they swore they would never pay and looking to capture value that may prove elusive post-close. The most effective GPs stepped up their game to identify targets and sharpen diligence, while simultaneously planning for the worst.
These are the key conclusions from Bain & Company, the world’s leading advisor to PE investors, in its tenth annual Global Private Equity Report, released today at SuperReturn International.
“The last five years, from 2014-2018, have been some of the best in the private equity industry. We’ve seen some of the highest levels of capital raised and put to work, the most exits and decent returns,” says Hugh MacArthur, global head of Bain & Company’s Private Equity practice. “As good as it all sounds, though, PE firms are working overtime to keep the momentum going. Chronically heavy competition is driving deal multiples to historic highs, and growing jitters about an eventual economic downturn are impacting decision-making. These risks are raising the bar for the buyer to do great due diligence, which involves integrating both the commercial and operational sides of diligence, and to structure deals thoughtfully.”
