Earlier this month, the US financial software provider, Sungard Data Systems, generated a return on investment for its private equity owners, which include the likes of KKR and Bain Capital, after being held for over 10 years in a sale to Fidelity National Information Services, at an exit value of $9.1bn. The size of this acquisition means that the aggregate global exit value for 2015 YTD currently stands at $304bn, led largely by trade sales, which contribute 67% of this total. According to Preqin’s Buyout Deals Analyst, 2014 saw 1,711 portfolio companies exited, either fully or partially, for a combined $446bn. Last year was a record year for private equity backed exits; this blog will take a closer look at how 2015 is shaping up.
Since 2009, both the amount of private equity-backed exits occurring and the aggregate exit value has been on an upward trend, as shown in the chart below. North America retains pole position in terms of the number of investments being realized, though the lead it holds over other regions has narrowed, with Asia and Europe currently accounting for half of all global exits in 2015 YTD. Interestingly, there has been a coinciding increase in the holding periods of investments: exits in 2006 were held for an average of 4.2 years, compared with 5.5 years in 2014 – another record.
The industrials, business services and consumer & retail sectors have observed the largest number of exits for the year so far by industry, in line with the historical data that shows these sectors have accounted for 57% of all exits since 2006. In terms of exit value, healthcare and telecoms & media play a more significant role, with the latter witnessing a number of multibillion-dollar exits so far this year, including the trade sale of BC Partners’ Suddenlink Communications to Altice S.A for $9.1bn.
Trade sales have consistently been the preferred approach that firms have been using to realize their stake in portfolio companies. Fifty-four percent of exits since 2006 have been a trade sale, merger or sale back to management. Furthermore, nine of the 10 largest exits of 2015 YTD have been trade sales. The remaining top 10 deal was a sale-to-GP, or secondary buyout, an exit method which has been growing in prominence since the financial crisis, and which accounts for 30% of exits so far this year. In terms of the proportion of exits, IPOs and private placements have remained at a steady rate since 2013, while restructurings have seen a relative decrease in popularity.