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Pace Quickens After Slow Start

By Steve Gelsi | Published on July 2, 2019

The second quarter and first half of 2019 saw a greater number of total private equity transactions as the middle market hit the accelerator, while megadeals by larger sponsors also thrived.

All told The Deal tracked 792 private market transactions in the three months ended June 30, up from 724 in the year ago-period. The numbers include auctions, M&A and financing transactions for add-on, investor group, leveraged buyouts, private acquisitions, recapitalizations and secondary buyout characteristics from The Deal’s database.

For the first half of 2019, private equity deal types comprised 1,566 transactions, up from 1,425.

While private equity firms faced high prices and jitters about the length of the current economic expansion, dealmaking managed to hit an even more rapid pace.

“There was a little softness in the beginning of the year with disruption in the financing market and that had to iron itself out, but there’s been plenty of activity since then,” said Jennifer Perkins, partner in the sponsor practice at Kirkland & Ellis LLP. “There can be some blips along the way, but nothing fundamental.”

Perkins has been seeing plenty of activity around larger deals as well as private equity portfolio companies bulked up through add-on deals in the middle market. Public companies weighing deals to create value and ample dry powder from sponsors provide fuel for deal-making.

“Sponsors will try to find a way to differentiate themselves such as having another portfolio company they want to combine with or an opening of some kind,” she said.

Looking ahead, the sponsored M&A market looks robust.

“The pipeline looks quite strong for the rest of the year,” Perkins said. “There’s an interest by public companies to do [deals], creating opportunities for sponsors. It may be a carve-out or a spin-off or a less traditional way to provide value to the seller—and where a sponsor can pick up a lower multiple asset and maybe add value.”

Seismic PE deals from the first half include Blackstone Group Inc.‘s (BX) $18.7 billion deal to buy the US logistics assets from GLP Pte. Ltd, as well as the $14.3 billion acquisition of Zayo Group Holdings Inc. by Digital Colony Management LLC and EQT Partners AB.

In another blockbuster, Hellman & Friedman LLC, Blackstone Group LP (BX), GIC Pte. Ltd., Canada Pension Plan Investment Board and JMI Management Inc. combined to buy Ultimate Software Group Inc. for $11 billion. Also an investor group including Diamond Sports Group LLC, a subsidiary of Sinclair Broadcast Group Inc. and individual investor Byron Allen agreed to acquire Fox Sports Net LLC from Walt Disney Co. for $9.6 billion.

Deals above $10 billion have been rare up until the past couple of years as PE firms continue to regroup from the historically large transactions prior to the 2008 financial crisis.

Meanwhile, firms that used to be considered middle market, such as GTCR LLC, Vista Equity Partners LLC, Thoma Bravo LLC, have been pushing the limit on their larger deals. GTCR, for example, agreed to acquire AssuredPartners Inc. from Apax Partners & Co. Ltd. for $5.1 billion.

 

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