Historic Run of Private Equity Exits
Rapid economic growth and strong markets coming out of the Covid-19 pandemic have fueled a historic run of private equity exits. Exit values are 50% larger 2021 year-to-date than the next highest annual figure. An estimated 1,129 exits are to have taken place as of September 30th.
The underlying drivers causing this historic run on PE exits are that of strong economic growth and highly liquid markets. These drivers have resulted in portfolio companies easily growing their revenue with heavy amounts of capital chasing deals, easily financing acquisitions. With expedited growth, firms are engaging in exits ahead schedule and at favorable multiples.
While nearly all industries have seen strong exit activity, the healthcare and technology sectors have been notably significant. These two sectors have accounted for roughly 65.0% of exits in the year of 2021. Furthermore, exit value has far exceeded exit count due to a drastic rise in large exits through IPOs and SPAC mergers. This is primarily due to the favorable valuations of tech-related companies that are accounting for more and more of PE firm portfolios.
Sources: Prete, Ryan. “PE Exits are on a Historic Run as Firms Net Billions.” 2021, October 26. www.pitchbook.com.