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Exits All Jammed Up ABA Business Law Spring Meeting Try the PitchBook Platform: Email: [email protected] Phone: 1-877-267-5593 Adley Bowden Director of Research, PitchBook [email protected]
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Exits All Jammed Up
ABA Business Law Spring Meeting
Try the PitchBook Platform:Email: [email protected] Phone: 1-877-267-5593
Adley BowdenDirector of Research, [email protected]
Source:PitchBook
-The Exit Backlog
-The Current State of Exits
-Outlook for Exits and PE
By Pudelek (Marcin Szala) (Own work) [CC-BY-SA-3.0 (http://creativecommons.org/licenses/by-sa/3.0)], via Wikimedia Commons
Source:PitchBook
The Problem: Private Equity Firms Have Been Unable to Exit Their Boom Era Investments
US PE-Backed Company Inventory
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013*0
1000
2000
3000
4000
5000
6000
7000
8000
2,266
2,990
3,837
4,740
5,413 5,6866,100
6,4386,771 6,861
Series52009-2013*2005-2008
As of Year
US
PE-B
acke
d Co
mpa
nies
Year of In-vestment
This is the Is-sue
Source:PitchBook
As a Result: Private Equity Firms Are Holding Onto Investments Longer
Median Holding Period (years) by Exit Type
2006 2007 2008 2009 2010 2011 20122
3
4
5
6
Corporate Acquisition Secondary Buyout IPOYear of Exit
20% IRR in year 4 = 2x Exit20% IRR in year 6 = 3x Exit
Source:PitchBook
Which is Causing LPs to Grow Impatient due to the Lack of Distributions from Mid-Decade PE
Funds US Median PE Fund DPI Over Time by Vintage Year
2 3 4 5 6 7 8 9 10 110
0.2
0.4
0.6
0.8
1
1.2
1.4
1.6
1.8
2000 2001 2002 2003 2004 2005 2006
Years Since Final Close
Source:PitchBook
How Did this Happen? A Lack of Exits and an Imbalance Between New Deals to Exits is How
U.S. Deals (excluding add-ons) vs. Exits
2005 2006 2007 2008 2009 2010 2011 20120
500
1000
1500
2000
2500
# of Deals (excluding add-ons) # of Exits
New Deals
Exits
These 2005-2008 Deals Should be Generating a Lot More Exits.
Source:PitchBook
So What is Happening? Exits are UpU.S. Quarterly PE Exit Activity
1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q2009 2010 2011 2012 2013
$0
$10
$20
$30
$40
$50
$60
0
50
100
150
200
250
$13 $4 $7 $17 $17 $25 $25 $42 $22 $35 $27 $34 $27 $30 $25 $57 $11
48 54 45
7697 105109
181
99
137 138155 157
144134
206
69
Capital Exited ($B) # of Exits
Source:PitchBook
• “Emphasize selling portfolio companies while being highly selective with regards to new investments.” – Madison Dearborn
Source:PitchBook
Secondary Buyouts Gaining Momentum as a Legitimate Buy/Sell Option
Private Equity Secondary Buyout Activity
1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q2009 2010 2011 2012 2013
-
20
40
60
80
100
120
13 13 12 18
31 31 32
79
31
55 54
72
55
65 68
108
33
Source:PitchBook
The Outlook: Its Rosy for 2013 and BeyondUS PE-Backed Company Inventory
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013*0
1000
2000
3000
4000
5000
6000
7000
8000
2,266
2,990
3,837
4,740
5,413 5,6866,100
6,4386,771 6,861
Series52009-2013*2005-2008
As of Year
US
PE-B
acke
d Co
mpa
nies
Year of In-vestment
This is why Its Rosy
Source:PitchBook
Side Affect #1: Lots of Deal Opportunities for Lawyers
Source:PitchBook
Side Affect #2: PE Fundraising Has Been Sluggish
US Private Equity Quarterly Fundraising
1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q2009 2010 2011 2012 2013
$0
$10
$20
$30
$40
$50
$60
$70
$80
0
10
20
30
40
50
60
$69 $35 $10 $26 $17 $13 $6 $10 $43 $18 $15 $14 $20 $42 $19 $29 $24
49
28
10
26
38
26
20
31
40
2725
2931
38
23 25 26
Capital Raised ($B) # of Funds Closed
Source:PitchBook
Slide Affect #3: A Slow Moving Shakeout?PE Investors that have not raised a fund since 2009
2000 2001 2002 2003 2004 2005 2006 2007 2008 20090
20
40
60
80
100
120
140
38
2416 17
31
71 71
125119
86
Year of Last Closed Fund
PE F
irms
Exits All Jammed Up
ABA Business Law Spring Meeting
Try the PitchBook Platform:Email: [email protected] Phone: 1-877-267-5593
Adley BowdenDirector of Research, [email protected]
