I previously discussed the trend in median holding periods for private equity-owned portfolio companies. However, there is a significant standard deviation in the data.
The histogram below shows the distribution of holding periods for portfolio company exits in 2016. The data revealed two interesting insights… one driven by macro-economics, the other cultural.
I previously discussed creating a portfolio of 560 publicly-traded stocks based on private equity ownership in each company (the PE-basket). While the last post focused on the overall performance of the PE-basket relative to benchmarks, I thought it would be insightful to look at individual company gains and losses within this basket.
While the average return for the PE-basket was 4.0% over a five-month period, 41 of these companies returned greater than 50%, 11 companies topped 100% and three companies exceeded 200%!
Although private equity firms normally invest in privately held companies, on occasion, some firms will invest in publicly traded companies… or will retain shares in portfolio companies that are now publicly traded.
A quick study of the www.PrivateEquityInfo.com database in late November showed 306 private equity firms collectively held 560 publicly traded-companies in their portfolios.
From these 560 publicly-traded companies, I created an equally-weighted basket of stocks (PE-basket) to track through time. Now that several months have passed, let’s check the performance (thus far) of this PE-basket relative to several benchmark ETFs.
If you are considering financial buyers to close your deal, odds are, it won’t be one of the larger private equity firms at the closing table.
In 2016, we consistently added 450 – 500 new private equity portfolio companies to the database every month. While the most acquisitive private equity firms were those brands we all recognize, there was something fundamentally interesting in the data.
Top 25 Most Active Private Equity Firms
(in order of number of investments made in 2016):
Holding periods for PE-owned portfolio companies correlate with macro-economic events – lengthening during recessionary periods and shortening during growth & recovery years.
The most recent data from www.PrivateEquityInfo.com shows median portfolio holding periods (4.9 years) trending down as PE firms capitalize on enhanced valuations. The peak was 5.7 years in 2014.
Private equity holding periods continue to lengthen…
For exits in 2014, the median holding period slightly increased to 5.8 years. These exits mostly represent portfolio companies that were acquired at the peak of the last bubble (2008), prior to the recession and likely at higher valuations. Looking forward, will the holding period decrease as the data begins to reflect acquisitions made during the recession or has the holding period of the private equity firms fundamentally lengthened?
More than 80% of U.S. private equity firms are located in just 10 states, with the largest concentration of firms in New York, California and Illinois.
The table below shows the top 15 states for private equity firms.
PrivateEquityInfo.com has ranked the top 30 private equity firms globally in an effort to add transparency to an otherwise fairly opaque industry.
Typically, private equity firms are ranked based strictly on their fund size. However, due to the current economic climate, fund size may not be the most accurate measure of a firm’s current activity and investment capacity.
We have ranked the largest, global private equity firms based on a more holistic view, considering a variety of metrics. The parameters include: fund size (of course), current investment appetite, maximum deal size the firm will consider and deployment of capital. This ranking is therefore admittedly subjective.
The Private Equity Info real estate data module tracks institutional investors that have a specific investment focus on the real estate sector. These firms include real estate investment trusts (REITs), real estate-focused private equity firms, hedge funds and other institutions that are active debt or equity investors in the real estate market.
We ran a study looking at the geographic distribution of private equity firms and their portfolio companies for European countries.
The majority of private equity firms are concentrated in the United Kingdom, Germany and France.
Industry Trends Report
