Mid-Year Data for Private Equity Activity in 2009

PitchBook, a private equity-focused research firm, has published its report on private equity as of the second quarter of 2009. The findings show that private equity investors continue to wait before deploying their $400 billion in available capital.

The industry appears to be rethinking the leveraged buyout and focusing on middle-market private equity deals, financed with mostly equity and little borrowing. PitchBook CEO, John Gabbert says of the report, “PitchBook’s analysis shows that the private equity industry is currently shifting gears in a return to its roots. More attention is being paid to middle-market deals using a healthier amount of equity where private equity’s operational and financial expertise can make a big difference. ”

Total Amount Invested in PE Deal Type ($M)


Key Findings from the 2009 Mid-Year Report

The first half of 2009 was the slowest six-month investment period since 2002 with only 407 completed investments, and just 174 of those were completed in the second quarter. However, another 44 deals, totaling $6.5 billion were announced during the quarter but have yet to close.

In response to the current credit markets private equity investors have been using less leverage and targeting smaller operational improvement and distressed company investments. These lower and middle-market companies now account for 70% of all investments. PE firms are also strengthening their current portfolio companies through add-on acquisitions, which accounted for 43% of all buyouts in the first half of 2009.

In Q2 2009 only the Business Products & Services and Information Technology industries were able to maintain their investment levels from the first quarter, with 54 and 29 deals respectively.

The BankUnited Financial acquisition was the largest of the quarter and accounted for over 25% of the total invested capital for the quarter.

The decrease in private equity investment is not due to a lack of available capital, which remains at an all time high of $400 billion. PE investors continue to raise capital and currently have enough dry powder to more than support the combined deal activity of 2004, 2005 and 2006 with the use of moderate leverage.

So half-way through 2009 private equity is still in a slump and investors are holding onto about $400 billion in capital.