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US Private Equity Activity Rebounded to Healthy Levels in 2020 Despite COVID-19 Headwinds
[January 12, 2021]

US Private Equity Activity Rebounded to Healthy Levels in 2020 Despite COVID-19 Headwinds

SEATTLE, Jan. 12, 2021 /PRNewswire/ -- PitchBook, the premier data provider for the private and public equity markets, today released its 2020 Annual US PE Breakdown Report, which found that private equity (PE) dealmaking bounced back during the latter half of 2020 to finish the year on a high note despite a tumultuous March and April due to the COVID-19 pandemic. When traditional leveraged buyout activity for platforms effectively froze, sponsors quickly pivoted to put capital to work in add-ons, minority transactions, and into public companies. Exit activity followed a similar trajectory but fell even more during the crisis only to rebound more strongly, with exit value ending up year-over-year. As portfolio company marks tumbled, PE firms invested additional capital into their holdings and pushed out exit timeframes but a roaring public equitites market compelled PE firms to publicly list many gargantuan portfolio companies. Fundraising remained steadier than deals and exits between quarters but saw a more sizable drop year-over-year. Early pandemic-related difficulties, such as performing due diligence via videoconferencing, delayed many fundraising efforts. However, the largest and more established PE firms thrived as limited partners (LPs) reupped with existing relationships.

To download the full report and underlying data, click here.

"2020 was a rollercoaster of a year across the board but the private equity ecosystem proved resilient. Heading into 2021, dealmaking appears poised to continue its blistering pace seen during the back half of 2020 before normalizing in the later parts 2021," said Wylie Fernyhough, senior analyst and PE team lead at PitchBook. "US PE firms are sitting on more than half a trillion dollars in dry powder and are antsy to put this capital to work as the American economy continues to recover. Buyouts in technology and healthcare will likely remain popular as will growth equity investments."

Investment Activity

  • US PE investment activity totaled $708.4 billion across 5,309 deals by year-end 2020, year-over-year dips of 7.3% and 3.4% respectively. This marks the first year since 2009 that both dealmaking value and count diminished.
  • Growth equity was a standout performer in 2020, investing the highest deal value on record at $62.5 billion, up 8.8% from 2019. The largest growth equity deal in 2020 was a $3.5 billion investment by Harvest Partners, TA Associates and GI Partners into real estate and investment management SaaS company, MRI Software.
  • Add-ons also propelled deal activity in 2020, accounting for 72.5% of all buyouts, eclipsing 2019's record to reach an all-time high. Although carveouts contributed less than a tenth of the overall deal count, several notable transactions were carved out from larger companies. DXC Technologies sold its state and local health and human services business to Veritas for $5.0 billion in 2020's largest such deal.
  • Software has been a refuge for investors during the COVID-19 pandemic, as stay-at-home orders accelerated adoption of digital entertainment, ecommerce, education, and healthcare technologies and as companies continued to invest in productivity tools for their now primarily remote workforces.

Exit Activity

  • PE-backed exit value fared better than expected in 2020, reaching a combined $378.3 billion across 952 exits – a 6% increase in value and 14% decrease in count year-over-year.
  • Public listings were the preferred route for the largest exits in 2020 with eight of the 10 largest exits being public listings. A few of the largest public listings in 2020 include Dun & Bradstreet  at a $7.3 billion pre-money valuation, Sotera Health at a $5.3 billion billion pre-money valuation and Pharmaceutical Product Development which went public at a $7.5 billion pre-money valuation.
  • Roaring public equity markets made 2020 the year of the special purpose acquisition company (SPAC), as these blank check companies raised more capital than in the previous decade combined, with well over 250 SPACs launched on US markets last year. Over the next few years, SPACs raised in 2020 may purchase PE-backed companies, providing another exit route going forward and potentially boosting future exit values.
  • Despite public listings and SPACs having a banner year, the pandemic sent sponsor-to-sponsor exits off a cliff in 2020 totaling approximately half the value of 2019 and dropping to 33.6% of overall PE exit value, even as the median sponsor-to-sponsor exit size continued climb.

Fundraising Activity

  • US PE fundraising dipped in 2020, with firms closing on 231 funds for a total of $203.2 billion – year-over-year declines of 38.4% and 36.6%, respectively. While fundraising was down, in part due to both a lack of mega-funds and virus-related issues, US PE firms still closed on a healthy amount of capital.
  • Most of the PE funds raised during the year had been planned pre-pandemic, and LPs re-up with established managers rather than risk placing capital with lesser-known entities. Similar to 2019, $5 billion+ vehicles amassed approximately half of the capital raised in 2020, but just 10 of these funds closed.
  • First-time funds faced an uphill fundraising battle in 2020, with first-time managers raising 25 funds totaling $5.7 billion – representing the lowest fundraising numbers since 2013. These funds accounted for approximately 10% of funds raised, a figure proportionate to the preceding five years, suggesting that LPs' strong appetites for developing relationships with the top-performing managers of tomorrow has not waned.
  • With regards to mega-funds, one of the most noteworthy massive funds closure belonged to software-focused buyout shop Thoma Bravo, securing a combined $22.8 billion across three separate funds – $17.8 billion in its flagship Thoma Bravo Fund XIV, $3.9 billion in its Discover Fund III and $1.1 billion in its Explore Fund tallied $1.1 billion.

Additional coverage in this report includes:

  • Introduction
  • Overview
  • Deals by size and sector
  • Q&A: Grant Thornton
  • Spotlight: 2021 PE outlooks
  • Exits
  • Fundraising

For more information about PitchBook, click here.

About PitchBook

PitchBook is a financial data and software company that provides transparency into the capital markets to help professionals discover and execute opportunities with confidence and efficiency. PitchBook collects and analyzes detailed data on the entire venture capital, private equity and M&A landscape—including public and private companies, investors, funds, investments, exits and people. The company's data and analysis are available through the PitchBook Platform, industry news and in-depth reports. Founded in 2007, PitchBook has offices in Seattle, San Francisco, New York and London and serves more than 45,000 professionals around the world. In 2016, Morningstar acquired PitchBook, which now operates as an independent subsidiary.


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