Broadly speaking, tech captures a sizable portion of private equity's total capital invested in the US, accounting for about a third of US PE deal value through the first half of the decade, per PitchBook data. That share spiked in 2016, with tech accounting for 44% of all PE activity based on capital invested. After a two-year drop, 2019 is picking up, with the second-highest share of deal value since 2010. Through August 30, almost 39% of US PE deals this year have been tech-related:
Investors have remained confident in technology, with the annual deal count rising as the sector grows to encompass a larger number of companies. It's a logical trend: Tech has encroached upon nearly every corner of the economy. Although much of the tech buzz often goes to venture capital, it's an inextricable component of private equity strategy. One key explanation for the increase is the shift of tech startups, originally VC-backed, into more mature companies attractive for PE funding.
The past decade's steady increase reflects that interest. 2018 saw 1,616 PE tech deals worth a collective $223.2 billion, according to PitchBook data, nearly doubling the deal count and nearly tripling the value:
2016 was the hottest year for PE tech deals in terms of value, clocking in $266 billion, but that particular spike in funding is partly driven by an outlier. The culprit? Dell Technology's buyout of information technology provider EMC. This $67 billion deal—backed by MSD Capital, Silver Lake Management and Temasek—remains private equity's largest tech LBO ever.
PE tech exit activity is also growing, in terms of price and count. As firms look to cash in on investments fired up in the post-recession kiln, this figure is only expected to rise. Last year saw the most PE tech exits in the last decade, with 411 exits worth a total of $152 billion, and 2019 is showing a healthy exit environment as well—made even more remarkable by the almost absence of PE-backed IPOs in 1Q due to the government shutdown:
Fiserv's acquisition of First Data, which closed in July, stands as the largest exit since the start of 2010. Via the $22 billion sale to Fiserv, JANA Partners, KKR and New Omaha exited their stakes in the Atlanta-based ecommerce payment platform.
Major PE investors lie behind tech deals and take part in these exits. With respect to investments, Austin, TX-based Vista Equity Partners has led the way, with 218 under its belt since the start of 2010, followed by ABRY Partners (165 deals), Providence Equity Partners (159), Thoma Bravo (147) and Insight Partners (140). Some firms, such as Vista and Thoma Bravo, focus exclusively on tech, a specialty aligns with the continued rising interest in the category.
This article has been updated to reflect that Vista Equity Partners is headquartered in Austin, Texas.
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