Q2-2019 Private Equity Industry Update
Long-term fund performance has remained strong this year with an increasing number of firms entering the market. Dry powder in the European and North American markets is currently at a new high of $1.54 trillion. Despite the high amount of available capital to be deployed, M&A activity has experienced a slower first half of the year in comparison to 2018. In Q2 of this year, 244 funds have closed globally, which is down from 399 in Q2 of 2018. Additionally, buyout investments in North America recorded its lowest aggregate deal value amount since 2017.
Lower deal volume is likely due to market uncertainty regarding fiscal policy and today’s high valuations. For North America and Europe in particular, the potential for rising interest rates has made investors hesitant to transact. Higher valuations may also be leading certain buyers to wait for a correction before deploying capital.
In regards to future outlook, Provident believes that M&A activity still has the capacity to grow in the second half of 2019 as sellers seek to exit while purchase multiples are high. This is even more likely to occur in the healthcare services sector where the industry is projected to continue attracting funds looking to establish platforms and consolidate practices in highly fragmented subsectors.
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