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Back to blog January 18, 2018 No Comments Author: Andy Jones

Macro Private Equity Trends – Video

This video provides some macro context to some of our recent private equity industry studies.



This video is a bit of a compilation of the various industry trends studies I have done recently. I was hoping a voice over would give some context and color to what’s going on in the private equity industry.

We’ve noticed in recent years that there has been an increase in both the number of funds as well as the size of the funds. The chart here shows the number of funds increasing from year-to-year.

Let’s take a look at how big these funds are for 2016. Generally, it’s a bell-shaped curve. The question is, how has it changed over time. If we look at the same chart, but for years 2014, 2015 & 2016. We can see, at the lower end, there are more private equity funds at the $5 – $10 million assets under management range. At first glance, in the $10 – $25 million bucket, you might think there are fewer funds, but what actually happened is that they have moved up to the next bucket size… which is why the next bucket is so much larger. In fact, in general, you can see that is the case for most of the funds across all AuM ranges. So, not only do we have more funds, they are getting bigger in size.

This graph shows the median holding period for portfolio companies over time. For 2017, the median holding period was about 5 years. What’s more interesting than the median, is the distribution from the median.

This graph shows the distribution of the holding periods for the exits for 2017. Again, you can see the median is 5 years… and it would seem to follow a normal distribution… except for a hump around the years 8 – 10 and another hump at years 12+.

In the years 8 – 10, the reason for that is, these are the portfolio companies that were acquired right before the recession. They were probably priced high and the private equity firms had to hold these investments a little bit longer to realize the value. So, there was a global economic reason for the hump you see here.

If you look at the years 12+, this is higher for two reasons:

  1. Because it includes data for more than just one year; and
  2. Because if you look at the data in this bucket, the vast majority of these are European portfolio companies held by European private equity firms.

There is a bit of a cultural difference here.

So what industries are the private equity firms investing in?

It’s interesting to note that the manufacturing sector, as a percentage of the total private equity pool of money being invested, has been on a general decline. It was in the 20 – 25% range, but now hovers around 15-16%. Now, there are more dollars flowing into the manufacturing sector from private equity firms than ever before, but this graph is showing a percentage of the dollars invested.

The question is, where is the money going if not into manufacturing?

I took a look at software. You can see a significant increase in the software sector as a percentage of private equity dollars invested. Also, for healthcare, a large percentage of the money that private equity firms are investing are going to this sector with a fairly steep incline in 2017, implying that it might continue in that direction upward. If you look at oil, again, it’s more than it used to be in 2012 – 2014, but then the price of oil tanked and private equity firms invested much less as a percentage in this sector and the services around this sector.

I hope this was useful for you to understand what’s going on in the private equity market and the trends surrounding it.

Thank you for watching.