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The Continued Dominance of North America-Focused Buyout Vehicles – April 2015

by Matthew Morris

  • 09 Apr 2015
  • PE

As the oldest and most recognized strategy and region in the private equity industry, North America-focused buyout fundraising acts as a good barometer of how the industry as a whole is faring. According to the dry powder tool on Preqin’s Fund Manager Profiles online service, the level of global buyout private equity dry powder remains at its highest since the end of 2009 ($456bn), causing concern for both GPs and LPs over the issue of inflated pricing and, consequently, potential returns that the strategy may produce. Despite this, last year saw 103 North America-focused buyout funds hold a final close, the highest number since 2008, raising an aggregate $112bn. As shown in the chart below, the financial crisis caused a stark decline in buyout fundraising, falling from its peak of $156bn in 2007, to just $35bn in 2011; it has yet to fully recover to pre-crash levels.

US-focused vehicles accounted for 61% of buyout capital raised globally in 2014, underlining the dominance of the country within the industry. This proportion is at its highest level since 2007, and represents an increase on the 55% share seen in 2013. Europe-focused buyout fundraising dropped off last year and even with Asia’s record buyout haul, North America-focused fundraising further increased its supremacy. Even at this early stage of 2015 the region’s dominance is apparent, with North America-focused funds accounting for 64% of all buyout capital collected in the year so far.

Preqin’s Funds in Market online service tracks 128 buyout funds currently in market targeting North America as their main investment region, collectively hoping to raise $98bn. These numbers are slightly down on the 137 funds that were in market at the same time two years ago, with the capital sought also lower by $33bn. With fewer funds in market, LPs’ concerns may be filtering through into GPs’ plans as firms remain focused on investing their dry powder. Even so, there are currently 25 buyout funds targeting North America that are looking to collect $1bn or more. The largest of these funds is Blackstone Capital Partners VII, which is hoping to amass a total of $15bn by its final close. Signs seem to be pointing once again to large, established managers benefitting in the current climate, while newer and smaller managers find it difficult to gain a foothold.

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