Private equity firms’ stores of undeployed capital rose to an all-time high in 2021, tumbling industry records as cheap debt, strong corporate valuations and a stronger-than-expected recovery from the first waves of the pandemic drove deal-making into new territory.
Clearly private equity managers were right to be optimistic heading into 2021. In interviews with S&P Global Market Intelligence a year ago, several predicted higher transaction levels and strong M&A activity. Their expectations may have been exceeded.
It took only the first three quarters of 2021 for deal making to break the previous annual record of $846.8 billion set in 2007, just before the global economic crisis, according to a report issued in December by global law firm Dechert LLP. It was a swift turnaround from pre-vaccine 2020, when the onset of the Covid-19 pandemic temporarily stymied deal-making before it rebounded in the second half, momentum the industry carried into 2021.
Exits were on track to exceed a record set in 2017, when the total value hit $700 billion globally. As of Nov. 9, firms had exited 3,204 investments with a total deal value of $569.4 billion, already ahead of 2020’s 12-month total, S&P Global Market Intelligence data showed.
Entries by private equity and venture capital firms were also at record levels in both Europe and North America by the third quarter of 2021. Between Jan. 1 and Sept. 30, U.S.-based firms recorded 6,029 entries with a total value of $302.99 billion, setting records for both deal volume and aggregate value.
European firms logged 4,321 entries over that same nine-month period, achieving a total value of €156.23 in just three quarters. That was higher than the full-year totals for both 2019 and 2020. As in the U.S., the information technology sector saw the most entries.
The largest private equity deal of the year appears to be KKR & Co. Inc.’s November bid for Telecom Italia SpA, a Rome-based telecommunications company. Total transaction value, including debt, comes to an estimated $36.7 billion, according to S&P Global Intelligence data.
One other deal cleared the $30 billion mark: a leveraged buyout of Northfield, Illinois-based medical supply company Medline Industries Inc. by an investor group that includes Hellman & Friedman LLC, GIC Pte. Ltd., Blackstone Inc. and The Carlyle Group Inc. Announced in June, the deal has a total transaction value of $32 billion, including debt, according to S&P Global Intelligence data.
In a year of huge fundraising, the 10 largest private equity funds to close in 2021 all raised at least $10 billion. Topping the list as of Dec. 13 was Hellman & Friedman Capital Partners X LP, the largest-ever fund from private equity investment firm Hellman & Friedman LLC, which closed in June.
