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.
Access to quality deal flow is the single largest determinant of success for investment banks and private equity firms. There is, however, a steady flow of potential deal intelligence that remains largely untapped.
The statistics from our private equity database show the median holding period for private equity portfolio companies is 4.8 years. That is, half of all portfolio companies are exited BEFORE they age 4.8 years under private equity ownership.
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.
Historically, manufacturing was the predominant industry of interest for private equity acquisitions. However, as PE firms increasingly looked for more scalable companies with lower CapEx requirements, over time, manufacturing acquisitions declined as a percentage of the total private equity investments.
The median holding period for private equity portfolio companies is currently 4.8 years, as reported in our recently updated portfolio company holding periods study.
Given this, it is reasonable to assume that portfolio companies held five years or longer might be good candidates/prospects for an exit.
Our M&A Research Database currently shows 218 portfolio companies that will reach the 5-year holding period milestone in the month of June, 2020. A few sample companies are presented below.
I periodically update the private equity portfolio company holding periods to track this trend over time. I thought this would be a good time to append another data point to the graph, just before this metric is impacted by the COVID-19 economy.
2020 YTD Median Holding Period = 4.8 years
Industry Trends Report
