PE activity across the globe has reached its highest quarterly levels in 14 years
A total of 1,671 deals, valued at over $360 billion has occurred in just Q1 of 2021 alone. This represents more than a doubling in dollar value, y-o-y, with total volume of deals rising by nearly 30%. This is the highest total dollar value of private equity deals since the second quarter of 2007.
- The five largest public PE firms recorded an impressive Q1 2021, sustaining the momentum they had gained coming out of the COVID-19 pandemic trough in late 2020. All five increased trailing-twelve-month (TTM) fee related earnings (FRE), a key focus for these firms.
- Gargantuan fund returns in the quarter not only grew AUM through appreciation but are likely to further propel fundraising for the year in an already benign environment. With all five managers speaking confidently about aggressive fundraising targets, we expect to see more and bigger mega-funds over the coming year, from KKR doubling down on opportunities in Asia to Apollo raising a massive North America-based buyout fund.
- KKR’s model of significant balance sheet investment has led to share price outperformance over the quarter and year as funds have appreciated. Investors are also bullish on the reliability and growth potential of Ares’ credit-heavy model. The market continues to reward these firms for rapidly scaling AUM and FRE, with all except Apollo outpacing the S&P 500 over the past year.
Software deals drive Technology, Media and Telecom (TMT) activity.
The TMT sector, which includes the video game industry, saw the most activity in Q1 in both volume and dollar value. 597 deals worth $171 billion were announced in the quarter, more than double that of 2020’s Q1.
Video games, mobile, PC and console are expected to continue their torrid growth well into 2022 and beyond. This portion of the TMT sector may be the most valuable for private equity investors moving forward.
Read more about PE deals in Q1 HERE