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US Middle-Market Deal Flow Remains Strong Through 3Q 2017 With Upper Middle Market Leading the ChargeSEATTLE, Nov. 14, 2017 /PRNewswire/ -- According to PitchBook's 3Q US PE Middle Market Report, private equity (PE) deal flow has been strong. US middle-market PE transactions totaled $233 billion across 1,652 deals though the first three quarters of the year, representing a 13% increase in deal value from the same period last year. 2017 has seen the two strongest quarters for mid-market capital invested since 2015, and activity for the remainder of the year is expected to remain robust. The increase in deal value is primarily a result of a spike in upper-middle-market (UMM) activity (between $500 million and $1 billion in EV), which is driven by the ongoing shift within PE and VC asset classes towards larger deals. What's more, the restaurant and bar industry is experiencing a revival of sorts, already surpassing last year's total deal count and value after years of declines. Private equity's long-term outperformance of most asset classes is a key driver behind middle-market PE's impressive fundraising. Through 3Q 2017, LPs have committed $84.3 billion across 131 funds – a 2.5% increase in capital commitments, over the same period last year. "US middle-market deal flow remains strong," said Dylan Cox, analyst at PitchBook. "Despite the unabated rise in prices, PE firms are finding ways to deploy capital. On the other hand, exit flow has been slower than expected. Sponsor-to-sponsor deals and dividend recapitalizations have become more prominent sources of liquidity." Pricing Pressures and Dry Powder Propel Upper-Middle-Market Activity PE Investors Return to Main Street Forecast Calls for Continued Strength in Fundraising Private equity's consistent outperformance of most other asset classes combined with its positive net cash flows globally to LPs every year since 2012 allows LPs to recycle capital back into the asset class. Middle-market PE funds are on pace to see another notable year for fundraising, with $83.4 billion committed to 131 funds through 3Q 2017. Meanwhile, public equities are also experiencing a surge in valuations, enabling LPs to contribute more, in dollar terms, to alternatives. One potential challenge to PE fundraising for next year, however, is that the net cash flows to LPs are likely to turn negative because of the downturn in exits. If overall PE fundraising does continue at its rapid pace, we expect to see an increase in funds raised by first-time managers, who garnered $8.6 billion in total commitments in 2016, the highest count since 2009. Additional findings in this report include:
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