The trending private equity investment sectors for August 2019 are highlighted below with a few example transactions.

I periodically update the private equity portfolio company holding periods data study to track this trend over time.

The longest median holding period for private equity owned portfolio companies was 5.6 years, back in 2014. This is intuitive because 5 or 6 years prior to 2014 represented those portfolio companies acquired at the peak of the market, just before the last recession. Consequently, the holding periods were extended, allowing more time to recoup from ill-timed acquisitions.

Since 2014, there has been a slight-but-steady downward trend in portfolio company holding durations – until now. The last data point on the right (2019 YTD, through August), represents the first trend reversal for this metric since 2014. Based on the last 5 years, I was expecting to report a median holding period of 4.6 years, but instead, the data shows:

2019 YTD Median Holding Period = 4.8 years

Following our interview with Emmersion, we reviewed our database of private equity platform investments in Latin America over the past five years. The following sectors were the most prominent private equity investment sectors in Latin America:

I recently spoke with Stephen Marks at Emmersion about investing in Latin America. With some minor edits, the text below captures our conversation.

Stephen Marks

Introduction

Stephen Marks is a Managing Director at Emmersion, an investment management firm, and a Partner at Emmersion Capital, an investment fund focused on lower middle market and early stage investments in Latin America. Stephen is considered a leading voice on socio-economic and investment related issues between the Americas. He consults and converses daily with trade, business, investment and governmental leaders in Central and South America, while working with private equity, corporate and family office investors in the United States to help them scale abroad.

Why should private equity firms invest in Latin America?

Let’s start with the U.S. side where competition is massive. I spoke to a private equity investor last month who told me that on average, they are seeing 20 or more firms competing for the same deal. Searching for better deal opportunity, private equity firms have been moving down market. There is no doubt that has impacted valuations and probably has something to do with the $1.3T in private equity capital that is currently sitting on the sidelines.

The cloud infrastructure is having a profound effect on technology, from storage to bandwidth to scale to price.

In recent years, massive technological platforms (servers) have been made available to large and small customers alike. It is, in fact, one of the most impactful advancements in technology in recent years. Due to the massive scale of these cloud computing platforms offered by Amazon (AWS), Microsoft (Azure) and others, near infinite computational power is offered at a fraction of the price compared to just a decade earlier. Consequently, many applications that could not have previously existed (due to limited processing speed or scalable bandwidth requirements) may now exist economically.

The trending private equity investment sectors for July 2019 are highlighted below with a few example transactions.

In my previous blog about the growth of the private equity industry, I made a note to follow-up with a study of the number of portfolio companies held by private equity firms as a function of the PE firm size. This is that study.

Collectively, the private equity firms in our research database hold a median of 7 current portfolio companies (the average is 11.3).

The private equity sector has experienced tremendous growth over the last five years, in absolute number of private equity firms, in the funds committed to the sector, in the number of executives working in the industry and in the number of portfolio companies acquired.

In fact, private equity investments have become so prolific, that few industry sectors (if any) remain untouched by private equity. Ten years ago, many business owners, especially in the mid-market, were unfamiliar with private equity. Yet, today, most businesses have interacted with private equity in some fashion, either through an acquisition, growth capital injection, introductory meetings & preliminary conversations, or, at the very least, some form of marketing outreach.

Growth in Private Equity Firms

The graph below shows the trend in the number of PE firms over the past 5 ½ years, from our M&A Research Database at www.PrivateEquityInfo.com.

Because there are some caveats (discussed below) that play into the exact quantity of firms shown, this graph is best viewed as indicative of the overall trend in private equity over time. Clearly, the trend is one of growth. In fact, ~12% compound annual growth over 5.5 years.

As the legality of cannabis has shifted over time in some U.S. states, a few private equity firms have made investments in the cannabis industry. I thought it might be interesting to see how they have invested in this space and which firms have made those investments.

Below are private equity backed cannabis transactions from our M&A Research Database at PrivateEquityInfo.com.

We reported logistics as a sector of investment focus for private equity firms in May 2019. However, logistics, as an industry sector, has been increasingly more interesting to private equity firms for some time now.

Our M&A Research Database shows 544 current PE-owned portfolio companies in the logistics space and an increasing PE appetite for logistics companies over time.