The trending private equity investment sectors for December 2021 were Software, Manufacturing and Healthcare.

Sample transactions for each category are highlighted below.

TruSight published the results of their investor survey, polling investors about deal flow sentiment, deal origination, workflow tools, and travel plans for 2022.

See the Survey Results.

Portfolio company aging stats are dictated by past acquisition activity and exit rates over time.

As portfolio companies grow older in their respective funds, they age out, via an exit, often within 3 – 7 years. Portfolio companies in the 5 – 7 year vintage signal potential near-term transactions – deal flow – the lifeblood of investment banks, private equity firms, accountants, law firms, and a host of M&A service providers.

For U.S. portfolio companies owned by U.S.-based private equity firms, there are currently:

• 1,225 portfolio companies currently aged (5 – 5.9 years)
• 997 portfolio companies currently aged (6 – 6.9 years)
• 776 portfolio companies currently aged (7 – 7.9 years)

As we previously reported, the median holding period for private equity portfolio companies industry wide is currently 4.9 years. Consequently, let’s look into the 5-year aging mark in more detail.

Turning Five

If we stand on the 5-year mark and look upstream at the parade of portfolio companies approaching their five-year anniversary in their respective funds, we’ll see the monthly aging flow shown in the graph below.

We reviewed all private equity platform investments in 2021 and ranked them by industry. The following Top 10 industries represent nearly half of all private equity platform acquisitions in 2021:

TOP 10 INDUSTRIES

1. Software
2. Manufacturing
3. Healthcare
4. Technology
5. Food & Beverage
6. Financial Services
7. Digital
8. Education
9. Industrial Services
10. E-Commerce

The chart below shows each of these industries as a percentage of the total PE platform acquisitions in 2021. Clearly, Software was the major industry of interest for private equity in 2021, representing17% of all platform acquisitions.

The trending private equity investment sectors for November 2021 were Pharma – Contract Research, Cloud Native Software and Enterprise Resource Planning Software. Overall, software acquisitions overwhelmingly represent the top industry of interest for private equity firms.

Sample transactions for each category are highlighted below.

Surprisingly, the median private equity portfolio company holding period has held stable at 4.8 – 4.9 years for the past four years. That is…

Covid had essentially no impact on the PE industry’s median hold period.

Historically, 5% to 8% of U.S. private equity platform acquisitions are made by PE firms outside the U.S.

2019 was the peak for this metric at 7.8%. That is, in 2019, 187 U.S.-based companies were acquired as new platform investments by international PE firms. (Add-on investments include a much larger number of acquisitions by international PE firms.)

The most targeted sectors by international private equity firms in 2021 were: Software, Healthcare, Technology, Data Analytics, and Food & Beverage (in that order).

The trending private equity investment sectors for October 2021 were Bio Technology, Restoration Services, Holiday & Vacation Services and Beauty Care.

Sample transactions for each category are highlighted below.

We’ve been tracking the average number of current portfolio companies held by private equity firms from our M&A Research Database.

We have previously reported that private equity, as an industry, is moving down market, increasingly investing in smaller deals.

Related Posts:

• Private Equity Firms by Deal Size Categories (June 2021)
• Growth in Private Equity Firms Over Time (August 2019)
• Private Equity Moving Down Market (February 2018)

While the migration down market was a trend, this seems to have stabilized, with little change in the last three years. That said, with the previous push down market, there’s now a long tail to the distribution of companies of interest to private equity firms.

So, how small of a company will PE firms still consider for a platform investment?