Private Equity-Backed Buyout Activity in California – May 2014

by Catriona McCarron

  • 15 May 2014
  • PE

The US has witnessed 552 private equity-backed buyout deals in 2014 YTD, 12% of which has been investments in California-based portfolio companies, accounting for $11.6bn (19%) of aggregate deal value in the US so far this year.

Breaking California-based buyout deals down by investment date, Q1 2014 saw an aggregate deal value of $11.1bn invested in the state, the highest first quarter total and second highest quarterly aggregate value since 2006. The high value of California-based deals in Q1 2014 was primarily due to the $9.4bn merger of Safeway, Inc. and Albertsons announced in March 2014, by private equity backer Cerberus Capital Management.  In terms of number of deals, Preqin’s Buyout Deals Analyst recorded 49 private equity-backed buyout deals in California in Q1 2014, equal to Q4 2013 and only one more than both Q2 and Q3 2013.

Analyzing California’s deals by type, in both 2013 and 2014 YTD, buyout and growth capital investments have accounted for 29% and 18% of the total number of private equity-backed buyout deals respectively.  In comparison to 2013, add-on transactions experienced a decrease of four percentage points to 38% of the total number of buyout deals in 2014 YTD, while accounting for 43% of all private equity-backed investments across the whole of the US so far in 2014.

Investments in California’s information technology sector have been rising in terms of number of deals as a proportion of all private equity-backed transactions since 2006. With a decrease to 12% in 2012 breaking the smoothly increasing trend, 2014 YTD has seen investments in information technology peak at 26% of the total number of deals. As for the rest of the US, nationwide 13% of the total number of buyout deals have been in information technology in 2014 YTD while industrials has commanded the majority of the private equity-backed buyout space, with 22% of the total number of deals so far this year.

With relation to the aggregate value of investments in the information technology sector, in 2014 YTD the sector has accounted for 5% of invested capital in California, a decrease of 43 percentage points from 2013’s statistics. Meanwhile, investments in California’s consumer and retail industry have contributed 82% of aggregate deal value in 2014 YTD, with $9.5bn invested so far this year, a rise of 66 percentage points on 2013.

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