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The Recovery of North America-Focused Buyout Fundraising – July 2014

by Courtney Higgins

  • 10 Jul 2014
  • PE

Data from Preqin’s Funds in Market online service demonstrates that North America-focused buyout fundraising has displayed an upward trend in capital raised in recent years, rebounding from the lows witnessed in the post-financial crisis era.

Buyout fundraising in 2006-2007, often referred to as the buyout boom-era, shows record levels of buyout fundraising in North America, with an aggregate $134bn raised from 121 funds in 2006 and an all-time peak of $156bn raised by 111 North American buyout funds in 2007. In addition, 2008 saw impressive figures when 112 funds collected over $119bn. Though 2008 witnessed the emergence of a global financial crisis, fundraising figures in the first half of the year remained buoyant, largely due to the successful closures of mega funds such as TPG Partners VI which raised $18.9bn and Carlyle Partners V which secured $13.7bn. Evidently, it took some time for the full effects of the financial crisis to be felt in the private equity industry.

Following this formidable period of buyout fundraising targeting North America, the onset of the global financial crisis led to a sharp decline in the market, with fundraising declining to a low of $35bn in 2011 raised by 58 funds – a startling decline of 78% from the record amount of capital collected by this fund strategy in 2007.

Since these low points, buyout fundraising focused on North America has seen vast gains; in particular, 2013 marked a post-financial crisis record high in North America-focused buyout fundraising with an aggregate $107bn in capital raised during the year. This marks a near 120% increase from the previous year in 2012 when only $49bn was garnered. Notably, 2013 witnessed the close of Apollo Investment Fund VIII, an $18.4bn fund managed by Apollo Global Management, which ranks as the largest buyout fund to close since the credit crunch, and also falls in the top five largest private equity funds ever raised. This gives some indication of the strength of buyout fundraising during 2013, and the progress of its recovery since the economic turmoil five years ago.

As of July 2014, the figure for the year to date buyout fundraising in North America stands at $66bn. Given that this is past the halfway mark of the total raised in the whole of 2013 for North America-focused buyout funds, 2014 may well produce similar or could even surpass the fundraising highs of 2013. Additionally, there are 121 vehicles currently in market pursuing the same strategy collectively seeking $81bn. On the other hand, this time last year there were 141 North America-focused buyout funds in market, aiming to collect $117bn. This comparison is suggestive of a drop in the momentum the market experienced last year.

 

This growth in the North America-focused buyout market can be partly attributed to the strong public and M&A markets that are providing buyout firms with an increasing amount of opportunities to invest in. These encouraging prospects in the buyout space, along with an increase in buyout fundraising, all point toward North America-focused funds beginning to reach greater prominence once again.Data from Preqin’s Funds in Market online service demonstrates that North America-focused buyout fundraising has displayed an upward trend in capital raised in recent years, rebounding from the lows witnessed in the post-financial crisis era.
 
Buyout fundraising in 2006-2007, often referred to as the buyout boom-era, shows record levels of buyout fundraising in North America, with an aggregate $134bn raised from 121 funds in 2006 and an all-time peak of $156bn raised by 111 North American buyout funds in 2007. In addition, 2008 saw impressive figures when 112 funds collected over $119bn. Though 2008 witnessed the emergence of a global financial crisis, fundraising figures in the first half of the year remained buoyant, largely due to the successful closures of mega funds such as TPG Partners VI which raised $18.9bn and Carlyle Partners V which secured $13.7bn. Evidently, it took some time for the full effects of the financial crisis to be felt in the private equity industry. 
 
Following this formidable period of buyout fundraising targeting North America, the onset of the global financial crisis led to a sharp decline in the market, with fundraising declining to a low of $35bn in 2011 raised by 58 funds – a startling decline of 78% from the record amount of capital collected by this fund strategy in 2007.
 
Since these low points, buyout fundraising focused on North America has seen vast gains; in particular, 2013 marked a post-financial crisis record high in North America-focused buyout fundraising with an aggregate $107bn in capital raised during the year. This marks a near 120% increase from the previous year in 2012 when only $49bn was garnered. Notably, 2013 witnessed the close of Apollo Investment Fund VIII, an $18.4bn fund managed by Apollo Global Management, which ranks as the largest buyout fund to close since the credit crunch, and also falls in the top five largest private equity funds ever raised. This gives some indication of the strength of buyout fundraising during 2013, and the progress of its recovery since the economic turmoil five years ago.
 
As of July 2014, the figure for the year to date buyout fundraising in North America stands at $66bn. Given that this is past the halfway mark of the total raised in the whole of 2013 for North America-focused buyout funds, 2014 may well produce similar or could even surpass the fundraising highs of 2013. Additionally, there are 121 vehicles currently in market pursuing the same strategy collectively seeking $81bn. On the other hand, this time last year there were 141 North America-focused buyout funds in market, aiming to collect $117bn. This comparison is suggestive of a drop in the momentum the market experienced last year. 
 
This growth in the North America-focused buyout market can be partly attributed to the strong public and M&A markets that are providing buyout firms with an increasing amount of opportunities to invest in. These encouraging prospects in the buyout space, along with an increase in buyout fundraising, all point toward North America-focused funds beginning to reach greater prominence once again.

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