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)
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
Food & Beverage
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.
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).
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?
Our Private Equity Info Research Database shows 228 portfolio companies held by private equity firms in the Supply Chain space, with PE firms showing a substantial increased interest in Supply Chain companies in recent years.
The graph below shows the trend of private equity platform investments in Supply Chain companies over the last 20 years.