I thought it would be interesting to look at the trends in private equity platform acquisitions year-by-year, since 2000. The graphs below represent 47,394 private equity platform acquisitions over the last 21 years.
We can clearly see the dip in new acquisitions during the dot.com bust (2001 – 2003), the last recession (2009), the skittishness of 2019 (Q4 mostly), and the pandemic of 2020.
As we reported in our year-end review: Top 10 Industries for PE Platform Investments in 2020, Software was the #1 industry of interest for private equity firms in 2020, as a percentage of all PE platform acquisitions.
The graphs below show the steep increase in private equity acquisitions in both Software and SaaS companies.
While private equity firms acquired considerably fewer companies in 2020, PE investments in healthcare, as a percentage of total PE platform acquisitions, increased significantly in 2020, now pushing 9% of total PE platform acquisitions.
Private equity firms are increasingly interested in scalable companies with lower CapEx requirements. Consequently, private equity acquisitions of manufacturing companies has steadily declined as a percentage of the total number of private equity platform investments.
We reviewed all private equity platform investments in 2020 and ranked them by industry. The following Top 10 industries represent nearly a third of all private equity platform deals in 2020:
TOP 10 INDUSTRIES
Before the era of personal computers, companies used “Mainframes” for large centralized computing. In the 1970s and ’80s, individual users could access the Mainframe from the terminal on their desk. The rise of the personal computer placed the computing power and storage on our desks. Hence, the term “desktop computer”.
In a sense, cloud computing is a return to the Mainframe style of computing. That is, accessing remote resources (servers, databases, digital storage capacity, software, etc.) over the internet through the terminal of our personal computers.
By sharing large pools of resources, cloud computing offers advantages of reduced cost, increased scalability, massive computing power, and greater reliability.
Cloud computing also enables flexibility with remote work practices, a common theme in 2020. This general transition to cloud computing coupled with the accelerated shift to remote work has created a surge in the already-growing, global cloud computing industry.
While there are many private equity investments in companies that offer cloud-based, SaaS solutions, surprisingly, we do not see many recent private equity investments in the pure cloud computing space.
The PEI M&A Research Database shows 481 private equity platform transactions in medical device companies:
Of the 185 current investments in medical device companies, the most active private equity firms for platform investments are:
Private equity platform investments in Software-as-a-Service companies increased significantly in 2020YTD as a percentage of all PE deals. Many SaaS companies have been less negatively impacted by the economic impacts of the coronavirus compared to other industries, both in terms of continued demand for their product or service as well as the agility to continuing operations, working from home. In many cases, SaaS companies have benefitted by the sudden change in industry dynamics.
Private equity platform investments in technology companies increased significantly in 2020YTD as a percentage of all PE deals. This is likely an influence of Covid-19, as private equity firms continued to close new investments in technology companies compared to the collective “pause” the PE firms placed on other industries.
Private equity investments in the healthcare sector, as a percentage of total PE platform transactions, have effectively doubled over the last 20 years.
Industry Trends Report
