EXPERT'S VIEW PE/VC funds' activity in H1 2021 - The USA and the EU

The turn of 2021 has seen a completely different outlook for private equity globally, with dealflow normalizing and deal execution returning to the old levels. According to Refinitiv, the first 6 months of 2021 saw 6,298 deals worth more than $500 Billion globally, the highest value in 40 years since data has been available.

This is a testament to the fact that the pent-up demand, rise in dry powder and new fundraising finally came into play. Other supporting factors like increasing headcount in Private Equity deal making and support teams, and to an extent the controversy of young bankers facing burnout in big-bulge Investment Banks due to increase in workflow can also be drawn back to the fact the deal making is booming.

Europe and North America have seen a lot of activity around all major sectors, but a major shift to be noted has been the bulk of dealflow that has happened in Europe as compared to North America. According to data sources like Pitchbook and Preqin, a lot of private equity deal making is expected to happen across the UK and other parts of Europe. Availability of liquid credit, changing tax regimes and the shift to normal are key driving factors. Not only Technology, IT Services and healthcare sectors are in demand, but also other sectors like consumer, industrials and ESG investments are also seeing a peaked interest.

Liquid and readily available credit is going to be a crucial pivot in the rise of dealmaking in the coming months. It may be a while as interest rates come to normal as European economies are slowly coming out of the economic slowdown posed by COVID-19. LBOs will see a continued rise. However, a key observation and interesting point to be noted is the emergence of private credit in private equity transactions.

The recent acquisition of stamps.com by Thoma Bravo for $6.6 Bn was one of a kind deal which saw the absence of a traditional bank to finance the leveraged purchase. Private debt funds are beginning to enter the play to fund mid-sized and large-sized transactions. Cash deposited in such funds has grown over more than $360 bn globally, according to data report by Preqin. It won’t be a surprise if this trend picks up aggressively in Europe as well in the coming months.

Boardrooms in big-bulge investment banks would be keeping a close eye around such transactions and would have to find ways to remain competitive in debt markets if this trend picks up aggressively.

Blackstone and KKR have been focusing heavily towards real estate across UK and US, and this will be an interesting space to look out for as many other real estate focused funds might also streamline their deals in the same geographies. The interest in Sports Leagues and Teams doesn’t seem to slow down any time soon. Not just football but Tennis, Formula1 and Rugby leagues have also seen considerable interest from PE firms.

With fans returning to stadiums across Europe and US and live sports picking up, a lot of traction is expected but whether deals go through or not remains to be seen as a lot of compliance and consensus cannot be agreed upon by the different parties in such a transaction especially players and teams.

There is a looming threat of multiple COVID waves ahead but with increasing percentages of populations getting vaccinated, it seems the private equity investment landscape is past the slow period. Attractive opportunities across platform and bolt-on acquisitions will continue to drive PE activity at a high rate.