Private Equity Consolidation in the United States.

by Kevin Neadley

  • 29 Sep 2011
  • PE

In 2011 YTD, private equity-backed add-on deals – particularly those completed in the United States - are becoming more prominent as private equity firms look to grow their portfolio companies inorganically, as opposed to the more traditional organic growth path. 

The most popular industries where Preqin is seeing this increased consolidation is within the US-based industrials, business services and healthcare sectors. As a proportion of total add-on deals seen this year to date, the industrials sector has attracted one quarter of all activity, with the business services and healthcare sectors attracting 21% and 19%, respectively.

For January – September 2011 alone, there have been a total of 443 add-on acquisitions spanning all industry sectors across the US. This is already a 5.47% increase on last year’s activity, with 2010 producing just 420 add-on deals for the entire year. Going forward, the US is likely to see greater consolidation as private equity firms continue to adopt a buy and build strategy, especially with the overall slowdown in large leverage buyout activity.

One noteworthy private equity-backed add-on deal completed this year was the $1.45bn add-on acquisition of HCA-HealthONE, a healthcare company based in Denver, Colorado. The healthcare business was acquired by HCA, a portfolio company of Bain Capital, Citigroup, KKR, Merrill Lynch Global Private Equity and Ridgemont Equity Partners. The acquisition of RC2 Corporation was another notable deal within the industrials sector announced in March this year. The company manufactures toy and infant products and was acquired for $640mn by Japan-based TOMY Company, a portfolio company of Mitsubishi Corp - UFJ Securities, and TPG.

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