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Back to blog December 09, 2022 No Comments Author: Andy Jones

PE Investments / Exits Ratio – Data Study

In 2018, we looked at the historical ratio of investments-to-exits for private equity portfolio companies. Generally, the data showed a trend of private equity firms pushing down market, focusing on smaller transactions. This down market trend was thematic from 2015 – 2018, and is now well-known within the M&A industry.

Today, we repeat this study with updated data from 2017 – 2022YTD. We now see a reversal of the previous trend. That is, the ratio of the number of PE (Investments / Exits) shows private equity firms now moving up market to focus on Large and Mega deals.

The Data

All data for this study pulls from our M&A research database at www.PrivateEquityInfo.com.


PE-Investments-Exits-Ratio-By-Year

Interpretation:

  • In 2017, PE firms that typically invest in Small deals made 3 platform Investments (acquisitions) for every Exit.
  • Thus far in 2022, Small deals grew at a rate of 2.5 Investments for every Exit, while Mega deals grew at 3.3 Investments for every Exit.
  • In all categories, in all years shown, private equity Investments have significantly outpaced Exits. That is, the private equity industry is growing as a whole, but the deal size mix has changed over time.

In the graph above, you can see the continued focus on smaller deals in 2017-2018, a transition period in 2019-2020, and then a significant flip of the script in 2021-2022 to focus on Large and Mega deals.

For this study, deal size ranges are defined by Enterprise Value:

Small $0 – 50 million     Mid $50 – 250 million     Large $250 – 500 million     Mega $500+ million

The graph below is the exact same data, but re-arranged to group the bars by size.

PE-Investments-Exits-Ratio-Grouped-By-Deal-Size

Raw Data

The following table shows the underlying number of investments and exits by deal size used for the graphs above. (NOTE: 2022 is YTD and only includes 9 months of data.)

PE_inv_exit_data-study_raw-data

Source: www.PrivateEquityInfo.com

While the Investments-to-Exits ratio is changing, the interesting point to note in the raw data is that the absolute number of transactions (investments & exits) is trending significantly lower in 2022 compared to 2021… and even lower than any of the previous five years.

If you have a view on the underlying trend here, leave your theory in the comments section below.

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