Exit Transactions
Exit Transactions
Private Equity Exit Transactions Down 82%
Everyone knows the IPO market is struggling but private equity firms are also having a hard time selling their investments to strategic buyers or other buyout firms. Perhaps the most telling illustration is that the total value of these private equity exits is only $20.8 billion so far this year. That value is a 82% drop from the total value of $115 billion for exit transactions in the same period of 2008. This is the lowest value since 2001 when private equity was hurt by the burst of the tech bubble.
However, the decline in exits does make sense, to a point. Private equity firms invest in companies with a long-term mentality and will usually hold these firms for at least 5 years and as much as 12 years. Therefore, a lot of the funds that have opened after the last recession will still have a couple years before they are willing to sell their portfolio companies. But obviously the economy has had an impact on private equity exits and buyouts are probably more interested in buying companies that have had their value market down a lot rather than selling right now. The DealBook has more on the decline in private equity exit transactions:
Private equity firms aren’t even selling to themselves: The total value of secondary buyouts, in which companies are sold from one buyout fund to another, is just $2 billion so far this year, or 10 percent of the total deal volume for private equity exits.
Secondary buyouts are usually a much higher percentage of the exits, ranging from about 40 percent to nearly 60 percent during the same period in 2005 though 2007. It’s just another sign that the buyout machine is still gummed up. (DealBook)
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