It was another banner year for private equity in 2018, as financial buyers put more of their stockpiles of dry powder to work.

Despite an uncertain geopolitical and market backdrop, both the number of buyouts and total buyout value reached new post-crisis highs. In total, there were 3,588 PE buyouts valued at US$556 billion, which is 58 more deals and a 3% increase in value compared to 2017.

Private equity activity by volume 2017 – 2018

Target location: Global Bidder location: Global Sectors: All Sectors

Private equity deal type(s): Buyout and Secondary Buyout

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PE firms remain flush with cash, and are turning over every stone in search of high-quality assets. The mismatch between available capital and the number of desirable targets has led multiples to climb ever higher. If the trend continues or accelerates, 2018 may end up being viewed as calm in retrospect.

North America remained the dominant location when it came to buyout value in 2018 at US$222 billion, and saw upticks in both the volume and value of deals compared to 2017. Western Europe also saw increase in PE deal value, up to US$190 billion, though one country proved a prominent exception: the UK, where activity declined as investors await clarity regarding Brexit. In Asia, the number of PE deals by locally based acquirers climbed higher, including for assets in the West.

Year-end setback

As last year came to a close, buyout activity slackened as volatility spiked in equity and commodity markets. There were 772 buyouts announced in Q4 2018 with total value of US$102 billion, a decline of 144 deals and a 20% decrease in value compared to the same period of 2017.

Just one of the top ten PE transactions in 2018 came in the fourth quarter: the US$6.1 billion announced acquisition of Finnish sporting goods manufacturer Amer Sports Oyj by a consortium that included China-based ANTA Sports Products and Hong Kong-based FountainVest Partners.

Tech on top

Looking at the leading sectors for buyout activity last year, technology, media and telecoms (TMT) landed in the top spot and industrials and chemicals came in second, both in terms of volume and value.

PE dealmakers focused heavily on software companies and online platforms within the tech sector, which in recent years has become the most sought after industry for many financial buyers. In the largest technology buyout of 2018, US-based Veritas Capital Fund Management and Evergreen Coast Capital agreed to pay US$4.9 billion for a majority stake in Athenahealth, a provider of online services for physician practices.

The largest industrials and chemicals deal represented the third-largest buyout of the year: the US$12.5 billion purchase of Netherlands-based Akzo Nobel’s specialty chemicals business by Carlyle Group and Singaporean sovereign wealth fund GIC Private Limited.

Financial services and business services both saw buyout activity increase in 2018, while dealmaking declined in the consumer and energy, mining and utilities sectors.

Exit priorities

The exit environment has been strong in recent years due to high demand on the part of both PE and strategic acquirers. But the pace of exits flattened somewhat in 2018 – although value was up. There were 1,705 sales valued at US$548.6 billion representing a decrease of 97 deals but a 15% increase in value year on year.

The slowdown in volume may be partly explained by macroeconomic headwinds. Against a backdrop of market volatility, talks of a recession, higher tariffs and a trade war between China and the US, it is little wonder that dealmakers were slightly warier, especially towards the end of the year.

Yet, with the US$1.14 trillion in committed capital, financial buyers will almost certainly continue to strike deals in the year ahead.