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PE’s prominence in the M&A scene continues to grow

PE-led acquisitions accounted for almost 40% of M&A volume in 1H. Is this the new normal?

PE-led acquisitions accounted for almost 40% of North American M&A volume in 1H. That’s a remarkably high share for the asset class, which has historically led less than 30% of all acquisitions. And that percentage has been creeping up over the past few years, according to PitchBook’s 2Q 2019 North American M&A Report.

PE’s place at the M&A table has usually been relegated—it’s hard to compete with synergy estimates from eager-beaver corporate buyers.

One change of late has been PE’s focus on growth instead of cost-cutting in particular industries, such as tech. We ran a breakdown for software M&A and found similar percentages, with PE now accounting for nearly 39% of all software acquisitions. In fact, PE did more $1 billion-plus software deals in 2Q than strategics did. All those massive PE funds are starting to compete head-on with the Oracles and Microsofts of the world.

We may see more of this going forward. It’s hard to ignore the success story of Marketo, which see-sawed as a public company for three years before it was acquired by Vista Equity Partners for $1.8 billion. Marketo spent a little more than two years under Vista’s control before Adobe snapped it up for $4.75 billion last October.

Public company executives surely took notice of the gains realized—lots of executives complain, often legitimately, that public market investors undervalue their share prices because they don’t fully understand their business models. Case studies like Marketo may result in public company executives becoming more receptive to buyout shops, which have more money than they know what to do with at the moment.

Featured image via Dmitrii_Guzhanin/iStock/Getty Images Plus

This column originally appeared in The Lead Left.

Read more about PE-led acquisitions in our latest North American M&A Report.

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    Written by Alex Lykken
    Alex Lykken is a senior analyst at PitchBook, covering custom research projects and white papers across the PE, VC and M&A markets. He worked on PitchBook’s editorial team from 2012 to 2015 and re-joined in 2017 after a two-year stint at Goldman Sachs. He attended Central Washington University and studied history and political science.

    Outside of work, he spends his time fishing, golfing, writing, losing at fantasy football, and trying to keep up with his two-year-old lab.
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