PitchBook June 29, 2015
With the second quarter (and first half) of 2015 coming to a close, it’s time to break down the data and see what global trends have emerged (or progressed) within the private equity, venture capital and M&A markets. In this kickoff to our quarterly recap series, the PitchBook Editorial staff discusses some of the key takeaways from the first half of the year and looks ahead to what may be in store in the months to come. Be sure to check back over the next week as we roll out detailed visual recaps of everything PE, VC and M&A in the past quarter.
“Get ready for another huge year in PE-backed exits, as 2Q in particular is tracking for a staggering tally in capital exited. It’s been interesting to note the activity regarding high-priced portfolio companies from the buyout boom, with Sungard (acquired in 2005 for $11B) filing for an IPO and in talks for a possible acquisition, while Biomet (acquired in 2007 for $11.4B) was recently sold for $14 billion. It appears the current exit-friendly landscape is allowing firms to salvage what they can following these long holds, and perhaps close the book on the old era.”
“Year-to-date, we’ve seen U.S. public markets trade relatively sideways, Chinese markets drop into bear-market territory and increasing uncertainty regarding the Greek debt crisis lead participants to flee markets. The climbing uncertainty abroad and in the U.S. business/economic cycle could serve as a trigger for a U.S. stock price correction; a probable outcome that will noticeably dampen the IPO exit ramp for PE shops. In 1H, we’ve already seen PE-backed IPOs decline by more than 50% on a YoY basis, while add-on deals jumped nearly 90% YoY. As the rest of 2015 pans out, I think PE shops will continue looking for synergies to underpin add-ons while PE-backed IPOs will remain relatively flat or continue to decline.”
“The number of VC-backed tech startups going public has been on the decline since 2Q 2014, dropping from 83 that quarter to 38 in 2Q 2015. A big factor driving this trend is the rise of late-stage financings, which have accounted for a larger portion of the total VC deal flow in 2Q (nearly 17%) than any quarter since 4Q 2012. Specifically, “private IPOs”—mega-rounds for companies that traditionally would have gone public for such investments—are contributing to IPO delays. But at some point, this private value creation will have to be substantiated with strong exits. That is something these late-stage investors (and their LPs) are banking on.”
“2015’s first half was dominated by talk of a tech bubble, rising valuations and unicorns, and rightfully so. 53 companies grabbed a VC round that generated a valuation of at least $1 billion (though not all of them first time billion-dollar club members) and there are now more than 100 private companies valued as high. All of 2014 saw only 71 companies raise a $1 billion+ valuation, a number that 2015 should pass in 3Q. Uber, Airbnb and Snapchat are holding onto the highest U.S.-based valuations; expect rumblings of their public exits to grow throughout the second half of the year.”
“Total M&A value eclipsed $1 trillion in 1H, only counting completed deals. There are a number of mega-deals still being finalized so 2015 is teed up for a possibly record-setting year. And given that the fundamentals that have contributed to this boom—confidence, cash and the push to consolidate—haven’t abated, we may be seeing these types of numbers for a while.”
“Healthcare M&A boomed in 1H to clear over $300 billion in global volume. In fact, deal value in 1H 2015 increased by 326% over 1H 2014. But it may have even further to go, especially in the wake of the Supreme Court’s safeguarding of the Affordable Care Act. Big pharma and hospital chains have been merging in order to cut costs and expand patent portfolios and coverage. Many players have yet to follow suit, which could portend sustained activity in 2H 2015.”
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