Where Are 2017 Private Equity-Backed Deals Heading?

We’re a little over half way through 2017, and so far it’s been as an interesting year as expected.  We’ve seen equity markets explode through the roof, home prices continuing to rise, a seemingly never ending investigation into potential Russian meddling in the 2016 Presidential election, rumors of war with North Korea, and a host of other economic and political news.

With the state of the world as it stands now, where would you guess the dollar value of private equity-backed deals is heading in 2017?

The Background

Before getting into some speculation, here’s a look at the value of private-equity backed deals from 2007 to 2016, according to Prequin.

The high-point over the past ten years is 2007, with a massive amount of about $700 billion in private equity-backed deals.

Since peaking in 2007, the dollar value of private equity-backed deals has never gotten close to $700 billion again.  In 2008, the dollar value of deals declined to about $206 billion.

Things didn’t improve in 2009, with the value of private equity-backed deals declining further to a ten year low of just $116 billion, a massive drop from $696 billion just two years prior.

The picture improved somewhat following the end of the global recession in 2009.  The following year, 2010, saw private equity-backed deals gain more than double of the prior year, to $239 billion.

Values continued to climb in 2011, to $279 billion, and stayed there in 2012 at about $278 billion.

In 2013, deal value rose again, to $313 billion, and then jumped again to$363 billion in 2014 and $424 billion in 2015.

Interestingly, although the global economy continued to accelerate in 2016, private equity-backed deal value didn’t.  Instead, private equity-backed deal value declined by about $105 billion to just $319 billion.  OK, but nowhere near the 2007 heydays.

Source: Statista, Prequin

Some Speculation on 2017

So, with the past ten years’ worth of experience as the background, where is 2017 private equity-backed deal value heading?

Obviouisly there are only two directions the figure can go – up or down.  Presuming the global economy doesn’t deteriorate into a recession, private equity-backed deals probably don’t have a huge downside risk.  Perhaps the lowest private equity-backed deal value could reach is maybe $250 billion.  What about the high end?  Well, given that the global economy also doesn’t look like it’s headed for a euphoric bubble, the high end might be somewhere around $450 billion.

These two figures – between $250 billion and $450 billion – represent a huge range, a range that will either leave billions on the table or billions made.  Ahh, the lovely game of private equity.

Conclusion

Overall, private equity-backed deal value sharply declined during the 2008 and 2009 global financial recession.  Since then, private equity-backed deal values have moderately recovered, reaching $319 billion in 2016.

The question now is: Where is deal value heading?  Will private equity-backed deal values rise again, perhaps to above $400 billion or are deal values due for another lackluster year in 2017?  The answer to this question largely depends on how expectations for the future of the global economy for the remainder of 2017 and through 2018 play out in the minds of private equity investors.