Report Shows Rebound in Middle-Market PE Deal Volume

(February 14, 2011) — Data shows there were 58 completed private equity transactions in Q4 2010 — the most in the past eight quarters.

The spike in the middle market in 4Q 2010, marking the most deals done since the onset of the economic crisis, reflects continued improvement in the overall mergers & acquisitions landscape.

“I think these findings are signs of the rejuvenation of the asset class,” Andrew T. Greenberg, CEO and Co-Founder, GF Data Resources, a firm that collects, analyzes, and reports on middle market private equity sponsored M&A transactions, told aiCIO. “The trends that have driven this activity are improvement in corporate performance, increases in public equity values, and increased availability of capital. Those are trends that affected larger companies in the private equity world first, and they worked their way down to the middle market,” he said, adding that the emergence of these trends in the middle market is a bright sign that the recovery in the capital markets is solidifying.

According to GF Data, the company counted a total of 147 midmarket private equity transactions for the calendar year. Middle-market was defined as transactions with enterprise values of $10 million to $250 million.

The report is based on data from 155 private equity firms and a database of 1,104 transactions closed between January 1, 2003, and December 31, 2010. 

“We expected the 4Q report to reflect a lot of activity, based on the general sense of market improvement,” said Greenberg. “However, we never expected the quarter to be a peak unto itself, driven by tax anxieties and other considerations. There was plenty of momentum earlier in the fall, and we see every sign that this tempo will continue through the early months of this year.”

Earlier findings from Coller Capital’s latest semi-annual Global Private Equity Barometer survey of 120 limited partners (LPs) jibes with the continued rebound in private equity. According to Coller Capital’s research, more than 80% of global institutional investors plan to seek new private equity managers within the next three years. Following the lead of other large institutional investors in Europe and Canada, South Korea’s National Pension Service (NPS) revealed plans to establish multiple private equity funds.

The Coller Capital’s Global Private Equity Barometer also showed that just over 40% of limited partners in Europe and Asia are still growing their private equity investments, compared to only 10% of North American investors. All regions, however, shared an effort among investors to find new private equity relationships.

According to the findings, 34% of investors are seeking to up their target allocation to private equity in 2011. “Post-crisis, people are looking to get more invested in the asset class,” Michael Schad, investment principal at Coller, told Global Pensions. Coller Capital partner Stephen Ziff added: “A strong theme that comes through in the survey is that LPs are becoming more and more confident in private equity as an asset class, but they are also becoming more discerning.”