What Did Private Equity Do During the First Half of 2013

Pitchbook recently released its Q3 2013 report on private equity conditions.  The report, which covers private equity activity through the first half of this year, provides some interesting insight into what is going on in the minds of individuals running private equity firms.

First off, the report highlights that the second quarter of 2013 was generally a poor quarter for deal flow, representing the worst quarter since the 2009 financial crisis.  Overall, the number of deals through the first half of 2013 amounted to 738 with total dollar volume of about $140 billion.  Should the second half of 2013 look like the first, total dollar volume will come in at around $280 billion, or a decline of about $77 billion from 2012 volume.

In terms of sectoral conditions, Information Technology continues to be a sector of interest to private equity firms, representing somewhat of a shift into what has been traditionally venture capital territory.  Private equity investment in the Information Technology sector was the only area to see a positive increase from the first quarter of 2013 into the second quarter of 2013.

Overall, if the second half of 2013 is akin to the first half, deals in the Business to Consumer sector will come out as the most invested in sector at around $94 billion.  Deals with the Business to Consumer sector would then be followed by Business to Business at about $61 billion, Information Technology at around $40 billion, Health Care at around $24 billion, Financial Services at about $21 billion, and Energy at about $14 billion.

Pitchbook Provides Insight Into Exits and Funds Raised

In terms of exits, on an annualized basis for 2013, the number of exits are on track to end 2013 at a little shy of 400, about where they were in 2008.  On the dollar volume associated with private equity exits, dollar volume is on track to come in around $63 billion, or about a $106 billion decline from the 2012 value.  If the second half of 2013 turns out to be like the first half and dollar volume exits come in around $63 billion, that would put the 2013 dollar volume between that observed in 2008, just before the financial crisis, and 2009, the year in which the world dealt with the recent financial crisis.

Finally, the Pitchbook report addresses funds raised by private equity firms.  When annualizing the 2013 figures, the amount of funds raised is on track to come in at around $146 billion, representing a $37 billion increase over the amount raised by the industry in 2012.  In looking at the recent trend, investors continue to gain greater confidence in the private equity space.

Overall, the private equity industry outlook got a little muddier in the second quarter of 2013, although the Pitchbook report certainly provides enough positives for those making money for their clients and themselves in the private equity industry.