PitchBook Report Methodologies

By James Gelfer
January 24, 2018

Benchmarks & Fund Performance

Data composition

  • PitchBook’s fund returns data is primarily composed of individual LP reports, serving as the baseline for our estimates of activity across an entire fund. For any given fund, return profiles will vary for LPs due to a range of factors, including fee discounts, timing of commitments and inclusion of co-investments. This granularity of LP-reported returns—all available on the PitchBook Platform—provides helpful insight to industry practitioners but results in discrepancies that must be addressed when calculating fund-level returns.
  • To be included in pooled calculations, a fund must have: (i) at least one LP report within two years of the fund’s vintage, and (ii) LP reports in at least 45% of applicable reporting periods. To mitigate discrepancies among multiple LPs reporting, the PitchBook Benchmarks (iii) determine returns for each fund based on data from the most frequently reporting LP. If (iv) that LP’s reports are not available for a particular quarter, data from the next-most consistent reporter is used. Employing this methodology, data from the most consistent reporting LP is used more than 90% of the time. For periods that lack an LP report, (v) a straight-line interpolation calculation is used to populate the missing data; interpolated data is used for approximately 10% of reporting periods.
  • Fund classifications are as follows: 
    • Private equity: Buyout, growth/expansion, mezzanine, restructuring/turnaround and diversified PE
    • Debt: Debt, direct lending, bridge financing, distressed debt, credit special situations, infrastructure debt, venture debt and real estate debt
    • Real assets: Real estate, real estate core, real estate core plus, real estate distressed, real estate opportunistic, real estate value added, energy, infrastructure, mining, timber
    • Venture capital (Note: Stage classifications or additional focuses are not yet employed.)
    • Secondaries
    • Fund-of-funds

Definitions

Vintage year

  • The vintage year is based on the year of first investment. If year of first investment is unknown, the year of the final close is used as the vintage year. However, if a firm publicly declares via press release or a notice on their website a fund to be of a particular vintage different than either of the first conditions, the firm’s classification takes precedence.

Internal rate of return (IRR)

  • IRR represents the rate at which a series of cashflows are discounted so that the net present value of cashflows equals zero. For fund-level IRRs, any remaining value in the fund is treated as a distribution in the most recent reporting period. This explains why some vintages show high IRRs but low DPI values.

Distributions to paid-in (DPI)

  • A measurement of the capital that has been distributed back to LPs as a proportion of the total paid-in, or contributed, capital. DPI is also known as the cash-on-cash multiple or the realization multiple.

Remaining value to paid-in (RVPI)

  • A measurement of the unrealized return of a fund as a proportion of the total paid-in, or contributed, capital.

Total value to paid-in (TVPI)

  • A measurement of both the realized and unrealized value of a fund as a proportion of the total paid-in, or contributed, capital. Also known as the investment multiple, TVPI can be found by adding together the DPI and RVPI of a fund. In aggregated statistics, the median DPI and RVPI are summed to calculate the median TVPI.

Fund count

  • Some funds in our dataset have cashflow data but no reported IRR figure. We do not calculate individual fund IRRs using quarterly cashflows, which means the sample sizes may differ for pooled calculations and median calculations.

Methodology

Median calculations

  • Shows the middle data point for a sample group.

Pooled calculations

  • All cashflows and NAVs for the sample group are aggregated in the calculation. For vintage-specific calculations, we begin the calculation in 1Q of the vintage year. In cases where the sample has unrealized value, the ending NAV is treated as a cash outflow in the last reporting period.

Equal-weighted pooled calculations

  • Each fund’s cashflows and ending NAV are expressed as a ratio of fund size. Each fund’s ratios are then used to compute pooled calculations for IRR and cash multiples using the methodology outlined above. Regardless of fund size, each fund in these calculations has an equal impact on the output.

Horizon IRR

  • Horizon IRR is a capital-weighted pooled calculation that shows the IRR from a certain point in time. For example, the one-year horizon IRR figures in this report show the IRR performance for the one-year period beginning in 2Q 2016 through the end of 1Q 2017, while the three-year horizon IRR is for the period beginning in 2Q 2014 through the end of 1Q 2017.

Standard deviation

  • Calculated using the sample-based standard deviation methodology

Public market index returns

  • Instances where the return of a public market index is cited, we have calculated the annualized return for the given period. All public indices are total return and denominated in US dollars.

Private Equity Breakdown

Deals

  • PitchBook’s PE deal data includes buyouts and PE growth investments. Only closed transactions, not rumored or announced deals, are counted.

Capital invested extrapolation

  • Capital invested is defined as the total amount of equity and debt used in the private equity investment. PitchBook’s total capital invested figures include deal amounts that were not collected by PitchBook but have been extrapolated using a multidimensional estimation matrix. Some datasets will include these extrapolated numbers while others will be compiled using only data collected directly by PitchBook; this explains any potential discrepancies.

Deal and exit estimation

  • Due to the nature of private market data, information often does not become available until well after a transaction takes place. To provide the most accurate data possible, we estimate how much of this new information will become available in the next four quarters by calculating the average percentage change in deal flow over the trailing 24 months observed four quarters after the initial reporting cycle. We then add this estimate to the reported figure for the most recent four quarters. Both the original reported figure and the estimated figure are provided for your reference.

Geographical scope

  • Only transactions involving companies headquartered in the US are included.

Exits

  • PitchBook only tracks completed exits, not rumored or announced transactions. Exit value, like deal value, includes exit amounts that were not collected by PitchBook but have been extrapolated using a multidimensional estimation matrix. Unless otherwise noted, initial public offering (IPO) sizes are based on the pre-money valuation of the company at the time of IPO. We exclude exits in which the only PE backing was a PIPE.

Fundraising

  • Unless otherwise noted, PE fund data includes buyout, diversified PE, mezzanine, mezzanine captive, growth and restructuring/turnaround funds. Fund location is determined by specific location tagged to the fund entity, not the investor headquarters. Only closed funds are tracked.

Middle Market Report

Definition

  • For this report, the middle market (MM) is defined as US-based companies acquired through buyout transactions between $25 million and $1 billion. Note that minority deals are not included. The middle market is further broken down into the lower middle market (LMM; $25 million to $100 million), the core middle market (CMM; $100 million to $500 million) and the upper middle market (UMM; $500 million to $1 billion). The lower bound of each range is inclusive of deals that are that exact amount, e.g. a transaction that is $100 million in size will be bucketed into the CMM rather than the LMM. This report covers only US-based middle-market companies that have undergone a buyout.

Capital invested extrapolation

  • Capital invested is defined as the total amount of equity and debt used in a private equity investment. PitchBook’s total capital invested figures include deal amounts that were not collected by PitchBook but have been extrapolated using a multidimensional estimation matrix. Regardless of the extrapolated deal value, deals are subsequently distributed into size buckets, below $1 billion, based on the corresponding proportion of known deal sizes and deal flow capture estimation rates. Some datasets will include these extrapolated numbers while others will be compiled using only data collected directly by PitchBook; this explains any potential discrepancies.

Deal and exit estimation

  • Due to the nature of private market data, information often does not become available until well after a transaction takes place. To provide the most accurate data possible, we estimate how much of this new information will become available in the next four quarters by calculating the average percentage change in deal flow over the trailing 24 months observed four quarters after the initial reporting cycle. We then add this estimate to the reported figure for the most recent four quarters. Both the original reported figure and the estimated figure are provided for your reference.

Exits

  • PitchBook only tracks completed exits, not rumored or announced transactions. Exit value, like deal value, includes exit amounts that were not collected by PitchBook but have been extrapolated using a multidimensional estimation matrix. Regardless of the extrapolated exit value, exits of unknown size are subsequently distributed into deal size buckets, below $1 billion, based on the corresponding proportion of known deal sizes and exit activity capture estimation rates. Unless otherwise noted, initial public offering (IPO) sizes are based on the pre-money valuation of the company at the time of IPO. We exclude exits in which the only PE backing was a PIPE. For the MM company inventory, we include companies that are expected to have been exited between $25 million and $1 billion.

Fundraising

  • PitchBook defines middle-market funds as PE investment vehicles with between $100 million and $5 billion in capital commitments. The report only includes PE funds that have held their final close. Unless otherwise noted, PE fund data includes buyout, diversified PE, mezzanine, mezzanine captive and restructuring/turnaround funds. Fund location is determined by specific location tagged to the fund entity, not the investor headquarters.

League tables

  • All league tables are compiled using deal counts for middle-market leveraged buyouts only to better reflect the other datasets within the report, with only the Lenders table also including all PitchBook debt round types in order to capture all debt provided to facilitate buyouts.

Geographical scope

  • Only transactions involving companies headquartered in the US are included.

‚ÄčVenture Monitor

Deals

  • We include equity investments into startup companies from an outside source. Investment does not necessarily have to be taken from an institutional investor. This can include investment from individual angel investors, angel groups, seed funds, venture capital firms, corporate venture firms, and corporate investors. Investments received as part of an accelerator program are not included, however, if the accelerator continues to invest in follow-on rounds, those further financings are included. 
    • Angel & seed: We define financings as angel rounds if there are no PE or VC firms involved in the company to date and we cannot determine if any PE or VC firms are participating. In addition, if there is a press release that states the round is an angel round, it is classified as such. Finally, if a news story or press release only mentions individuals making investments in a financing, it is also classified as angel. As for seed, when the investors and/or press release state that a round is a seed financing, or it is for less than $500,000 and is the first round as reported by a government filing, it is classified as such. If angels are the only investors, then a round is only marked as seed if it is explicitly stated.
    • Early-stage: Rounds are generally classified as Series A or B (which we typically aggregate together as early stage) either by the series of stock issued in the financing or, if that information is unavailable, by a series of factors including: the age of the company, prior financing history, company status, participating investors, and more.
    • Late-stage: Rounds are generally classified as Series C or D or later (which we typically aggregate together as late stage) either by the series of stock issued in the financing or, if that information is unavailable, by a series of factors including: the age of the company, prior financing history, company status, participating investors, and more.
    • Growth equity: Note: Growth equity data is only included in its specific section and not included in any other venture datasets. Rounds must include at least one investor tagged as growth/expansion, while deal size must either be $15 million or more (although rounds of undisclosed size that meet all other criteria are included). In addition, the deal must be classified as growth/expansion or later-stage VC in the PitchBook Platform. If the financing is tagged as late-stage VC it is included regardless of industry. Also, if a company is tagged with any PitchBook vertical, excepting manufacturing and infrastructure, it is kept. Otherwise, the following industries are excluded from growth equity financing calculations: buildings and property, thrifts and mortgage finance, real estate investment trusts, and oil & gas equipment, utilities, exploration, production and refining. Lastly, the company in question must not have had an M&A event, buyout, or IPO completed prior to the round in question.
    • Corporate venture capital: Financings classified as corporate venture capital include rounds that saw both firms investing via established CVC arms or corporations making equity investments off balance sheets or whatever other non-CVC method actually employed.

Exits

  • We include the first full liquidity event (i.e., M&A, buyout, IPO) for holders of equity securities of venture-backed companies. This does not include direct secondary sales, further share sales following an IPO, or bankruptcies. M&A value is based on reported or disclosed figures, with no estimation used to assess the value of transactions for which the actual deal size is unknown. Unless otherwise noted, IPO sizes are based on the pre-money valuation of the company at the time of the transaction.

Fundraising

  • We define venture capital funds as pools of capital raised for the purpose of investing in the equity of startup companies. In addition to funds raised by traditional venture capital firms, PitchBook also includes funds raised by any institution with the primary intent stated above. Funds identifying as growth-stage vehicles are classified as PE funds and are not included in this report. A fund’s location is determined by the country in which the fund is domiciled; if that information is not explicitly known, the HQ country of the fund’s general partner is used. Only funds based in the United States that have held their final close are included in the fundraising numbers. The entirety of a fund’s committed capital is attributed to the year of the final close of the fund. Interim close amounts are not recorded in the year of the interim close.

Geographical scope

  • Only transactions involving companies headquartered in the US are included.

Capital efficiency score

  • Our capital efficiency score was calculated using companies that had completed an exit (IPO, M&A or PE Buyout) since 2006. The aggregate value of those exits, defined as the pre-money valuation of the exit, was then divided by the aggregate amount of VC that was invested into those companies during their time under VC backing to give a Multiple On Invested Capital (MOIC). After the average time to exit was calculated for each pool of companies, it was used to divide the MOIC figure and give us a capital efficiency score.
 

M&A Report

Definition

  • M&A is defined as the substantive transfer of control or ownership. We track only completed control transactions. Eligible transaction types include control acquisitions, leveraged buyouts (including asset acquisitions), corporate divestitures, corporate asset purchases, reverse mergers, spinoffs, and asset divestitures.
    • Debt restructuring or any other liquidity, self-tenders (in which a company undertakes an offer for a typically limited number of its own shares to ward off a hostile takeover) or internal reorganizations are not included
    • Announced, rumored or canceled deals are not included.
    • Aggregate transaction value is not extrapolated using known deal values, unless otherwise noted as estimated.

Note

  • Corporate asset purchases were not considered an eligible transaction type until the 2Q 2017 edition of this report. As such, some historical deal flow figures will have shifted beginning at this time.

Capital invested extrapolation

  • Capital invested is defined as the total amount of equity and debt used in the transaction. PitchBook’s total capital invested figures include deal amounts that were not collected by PitchBook but have been extrapolated using a multidimensional estimation matrix. Some datasets will include these extrapolated numbers while others will be compiled using only data collected directly by PitchBook; this explains any potential discrepancies.

Deal flow estimation

  • Due to the nature of private market data, information often does not become available until well after a transaction takes place. To provide the most accurate data possible, we estimate how much of this new information will become available in the next quarter by calculating the average percentage change in deal flow from the first to second reporting cycle over the trailing 24 months. We then add this estimate to the reported figure for the most recent quarter. Both the original reported figure and the estimated figure are provided for your reference.

Geographical scope

  • Only transactions involving companies headquartered in Europe and North America are included.

IPOs

Postvaluation

  • For this report, PitchBook calculated postvaluation as the total number of outstanding common shares multiplied by the final IPO price.

Offering size

  • PitchBook calculates offering size as the total number of common stock shares offered multiplied by the final offering price. If the stock has not achieved a final price, the midpoint of the pricing range is used. If the pricing range has not been filed, the proposed maximum aggregate offering price is used.

Upcoming IPOs

  • The companies were selected among the total number of PE and VC-backed companies that are currently in registration to go public.

PE or VC sponsorship

  • PitchBook bases PE or VC sponsorship on whether or not a PE or VC investor owns an interest in a company that has filed for an upcoming IPO.

American Depository Shares

  • When applicable, PitchBook calculates American Depository Shares as a representation of ordinary (common) shares, taking into account whatever representation is outlined in the company’s SEC filing.

Deal Multiples Report

Survey process

  • Responses collected across multiple iterations of our Global PE Deal Multiples Survey have been aggregated and augmented with PitchBook Platform data to generate the underlying datasets cited in this report. The survey is typically sent out to a worldwide audience via the PitchBook newsletter or emailed to a customized audience of relevant industry professionals across the globe.

Notes regarding survey phrasing

  • In the survey, transaction fees were defined as legal, advisory, accounting or due diligence fees specifically related to that transaction and paid to a third party. Monitoring fees were defined as fees charged to the portfolio company by the general partner for its advisory and management services.

Notes regarding transactional data

  • Not every survey participant provides answers to every question, yet to improve overall sample size, we include all data points recorded via the survey process. In combination with the fact that not every transaction pulled from the PitchBook Platform has every relevant financial statistic, the datasets underlying different charts of transaction multiples are not static. There will be overlap among datasets yet each chart should be interpreted more as a snapshot of the industry rather than a given population of transactions.

Deals

  • PitchBook only tracks completed transactions, not rumored or announced deals. The eligible PitchBook transaction types utilized in this report are all buyout types, as opposed to overall PE activity covered in other reports, which also include growth investments and investor buyouts by management.

Additional note

  • Due to the opaque nature of private markets, we are constantly backfilling our database to include the most up-to-date information. Consequently, some data points may change from time to time, particularly for more recent quarters.

Global League Tables

  • All league tables are compiled using the count of completed deals for the specified deal type, region and/or other criteria. Only publicly disclosed transactions are included.

Private Equity

  • The report includes all PE investments (buyouts as tracked by PitchBook, growth, investor buyouts by management), excluding real estate investments. Only investments made directly by PE investors or their portfolio companies are counted. Buyout deals are defined as transactions in which the PE investor receives a controlling ownership stake in the target company. Growth deals are defined as minority investments. Add-on deals are defined as acquisitions by companies with PE backing.

Venture Capital

  • This report includes all traditional VC investments (including angel/seed), excluding venture rounds tracked as accelerator/incubator, as well as prior round types including crowdfunding. Only investments made directly by VCs, incubators/accelerators and angels—all investor types tracked as VC by PitchBook, in essence—are counted. As our league tables are based on round classifications, financings by investors such as corporate VC arms are included.

M&A 

  • Eligible transaction types include control acquisitions, leveraged buyouts (including asset acquisitions solely for LBOs), reverse mergers and spin-offs. Transactions must involve SMEs or corporations, and must be a substantive transfer of control or ownership. Debt restructurings or other liquidity, self-tenders or internal reorganizations are not included.

Service Providers 

  • Service provider (SP) league tables are compiled using the same criteria for deals as the other league tables. Transactions are not counted twice, meaning if the SP provided the same service to both the investor and company on one deal, it would only receive credit for one deal in the rankings, not two.

Exits 

  • Exit league tables take into account both full and partial exits via corporate acquisition, secondary PE buyout, buyout by PE firm and IPO. Dividend recapitalizations are not taken into account in the report.

Industries & Sectors

  • Companies tracked by PitchBook have a primary industry, as well as secondary industries. For this report, the primary industry was used to determine rankings by industry and sector.

US Regions

  • West Coast: Alaska, California, Hawaii, Oregon, Washington
  • Mountain:  Arizona, Colorado, Idaho, Montana, Nevada, New Mexico, Utah, Wyoming
  • Midwest: Iowa, Kansas, Missouri, Nebraska, North Dakota, South Dakota 
  • Great Lakes: Illinois, Indiana, Michigan, Minnesota, Ohio, Wisconsin
  • New England: Connecticut, Maine, Massachusetts, New Hampshire, Rhode Island, Vermont
  • Mid-Atlantic: Delaware, DC, Maryland, New Jersey, New York, Pennsylvania, Virginia, West Virginia
  • South:  Arkansas, Kentucky, Louisiana, Oklahoma, Tennessee, Texas
  • Southeast: Alabama, Florida, Georgia, Mississippi, North Carolina, Puerto Rico, South Carolina

European Regions

  • UK & Ireland: United Kingdom, Ireland, Channel Islands
  • DACH:  Germany, Switzerland, Austria
  • France/Benelux:  France, Belgium, Netherlands, Luxembourg
  • Nordic: Denmark, Faroe Islands, Finland, Greenland, Iceland, Norway, Sweden
  • Southern Europe: Europe: Andorra, Cyprus, Gibraltar, Greece, Italy, Malta, Monaco, Portugal, San Marino, Spain
  • Central & Eastern Europe: Albania, Belarus, Bosnia-Herzegovina, Bulgaria, Croatia, Czech Republic, Estonia, Hungary, Kosovo, Latvia, Lithuania, Macedonia, Moldova, Montenegro, Poland, Romania, Russia, Serbia, Slovakia, Slovenia, Ukraine

Rest of World

  • Any country besides the United States or European nations.

US PE Lending League Tables

Notes

  • In US PE Lending League Tables, the scope is restricted to lending to US-headquartered companies in private equity transactions and transactions involving PE or formerly PE-backed companies only. We utilized current financing statuses to help define the scope, in addition, restricting all relevant businesses to status tags of PE- backed, PE-backed with an incomplete transaction, and formerly PE-backed (the last in order to accommodate businesses that, in the course of an M&A transaction with a PE-backed enterprise, saw a lender’s involvement). All league tables are compiled using the count of completed deals for the specified deal type, region and/or other criteria.

Private Equity Deals

  • The report includes select types of PE investments, excluding real estate investments. Only investments made directly by PE investors or their portfolio companies are counted. Buyout deals are defined as transactions in which the PE investor receives a controlling ownership stake in the target company. Secondary buyouts are defined as when a PE investor receives a controlling ownership stake in a target company that is already backed by a PE investor. Add-on deals are defined as acquisitions by companies with PE backing.

Lenders

  • Lender league tables look at completed PE deals the lender provided debt financing for in a given time period or region. In league tables for debt-only financings, the transaction must involve debt financing to a company that is PE-backed.

Debt types

  • The report includes select debt types as tracked by PitchBook, limited to general debt, senior debt and revolvers in this edition, as long as they were used in conjunction with a leveraged buyout or add-on. General debt tables include all debt types as long as the transaction occurred with a PE-backed company. The tables of senior debt and revolvers are restricted to only those specific debt types.

Industries & Sectors

  • Companies tracked by PitchBook have a primary industry, as well as secondary industries. For this report, the primary industry was used to determine rankings by industry and sector.

Unicorns

Data composition

  • PitchBook defines a unicorn as a venture-backed company that has raised a venture round bequeathing a post-money valuation of at least $1 billion. 
  • Unless otherwise noted all unicorns included are those that are headquartered in the US.
  • In the investor league tables related to stage and series, the count of unicorns by investor tracks all unicorns, not merely active unicorns. For example, having invested in three unicorns, two of which have since gone public, would still credit an investor with three in that tally.
  • Underlying datasets of unicorn inventory and deal flow do include past unicorns due to the necessity of such data having to reflect historical performance. For example, US unicorn count and aggregate post-valuations do include unicorns that have since exited, and the chart depicting new US unicorn count reflects the unicorns that were new within that year but have since potentially exited.

For more information on our methodology, contact reports@pitchbook.com or research@pitchbook.com.

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