Global private equity picked up slightly during the first quarter of this year, with 79 final fund closes raising a little more than $50 billion, a 5% increase over the fourth quarter of 2009, according to Preqin Ltd. "The results for Q1 2010 are still very low historically, and conditions remain extremely challenging for fund managers seeking commitments for new vehicles," said Preqin spokesman Tim Friedman in a statement.
He added that with more capital being called up than distributed, investors do not have to invest at the same pace as in previous years in order to maintain their private equity allocations. Moreover, investors are strengthening their due diligence processes and focusing more intensely on fund terms and conditions; as a result, funds are taking longer to close, currently about 19 months on average.
Friedman said that interviews with investors indicate they will increase their allocations to the sector in 2010 compared with last year. "We do anticipate a further rise in fundraising for Q2 2010," he said.
Preqin's quarterly deal flow data show that a total of 307 private equity deals announced in Q1 2010 had an aggregate value of nearly $27 billion, a hefty 35% decrease from Q4 2009 but double the aggregate deal value of Q1 2009.
Nearly half the deals globally in Q1 2010 were leveraged buyouts, accounting for 60% of the aggregate deal value during the quarter. The largest deals were Bain Capital's buyout of Dow Chemical's Styron Unit for $1.6 billion and KKR's buyout of Pets at Home from Bridgepoint Capital for $1.5 billion.
Friedman said that Q1 2010 was notable for a surge in secondary buyout deals: 24 secondary buyouts valued at $7 billion, which compares with 43 buyouts valued at $5 billion for all of 2009.
Michael S. Fischer (msf7@columbia.edu) is a New York-based financial writer and editor and a frequent contributor to Wealth Manager.
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