Q1 2014 has been a strong quarter in terms of aggregate value of private equity-backed buyout deals, with an increase of $18.8bn or 31% on the final quarter of 2013. However, in terms of number of deals announced and completed, numbers are down 11% with 688 investments recorded on Preqin’s Buyout Deals Analyst for Q1 2014.
Perhaps one of the most notable figures from Q1 2014 is the increase in number of large cap transactions, with 19 deals in Q1 priced at $1bn or more, contributing an aggregate value of $49.5bn to the quarter’s results. This is an increase of 36% in terms of number of such deals from Q4 2014, and a striking 111% increase on Q1 2013. The transaction with the largest reported value in Q1 2014 was Cerberus Capital Management’s merger of existing portfolio company, Albertsons LLC and Safeway, Inc. in a $9.4bn transaction, announced in March 2014. In contrast, both small cap (up to $250mn) and mid-cap (under $1bn) transactions have seen a decrease in number in Q1 2014 compared to the previous quarter, the biggest decrease being from mid-cap deals which experienced a 20% decrease from Q4 2014.
In terms of deals by investment type, Q1 has seen leveraged buyout (LBO) deals account for a 55% majority of aggregate deal value and a significant two-fifths (40%) of total number of deals, which is equal to the proportion of number of LBO transactions recorded in Q4 2014. Secondly, add-on deals commanded 37% of total number of deals and 28% of aggregate deal value in the first quarter of 2014; an increase of four percentage points in terms of number of deals to the last quarter and up seven percentage points in reference to aggregate deal value.
Consumer & retail was the industry with the highest aggregate deal value in Q1 2014, commanding 22% to total, while accounting for 13% to total number of deals reported in the quarter. This represents an increase of five percentage points in terms of aggregate deal value and a one percentage point decrease in number of transactions, when compared to the previous quarter. 149 deals took place in the industrials sector in Q1 2014, equating to 22% of total number of buyout transactions with $9.4bn invested in the industry.
Regionally, private equity-backed deals in North America represented the majority of Q1 2014’s transactions in terms of number and aggregate value, accounting for 57% and 60% of the total, respectively. European investments have remained at 30% to total number of deals between Q4 and Q1, with a decrease of eight percentage points in aggregate deal value in Q1 2014. Meanwhile buyout activity in Asia has witnessed 50 transactions with a value of $12.8bn, a 19% decrease in terms of number of deals, but a $3.8bn increase in aggregate deal value since the last quarter of 2014. As for regions outside North America, Europe and Asia, in both the first quarter of 2014 and the last of 2013, investment activity here has contributed 4% to aggregate deal size, and made up 6% to total number of deals.