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Alternative Market Briefing

Small to mid-market private equity deals outperform mega deals by 5% Pantheon finds

Friday, September 27, 2019

Bailey McCann, Opalesque New York:

New data from Pantheon suggests that private equity investors should look to the smaller end of the market in order to find high value returns. The study looks at buyout deals with vintages 2000-2012 and shows that small to medium buyouts outperformed large to mega buyouts by a Total Value to Paid In (TVPI) compounded annual growth rate (CAGR) of 5%.

"Five percent doesn't necessarily sound significant, but in a long-term portfolio it can add up," said Dr Andrea Carnelli, Vice President at Pantheon and one of the authors of the paper in an interview with Opalesque. According to Carnelli, there is more opportunity at the small end of the market. Those deals also tend to exhibit lower leverage rates and small businesses have greater room for improvement. Taken together, these factors can lead to outperformance over large or mega deals.

This study uses proprietary Pantheon data on buyout deals executed between 2000 and 2012 by GPs committed to by Pantheon across USA, Europe and Asia/ RoW; the vintage range is cut off at 2012 to ensure that the dataset includes deals that are mature enough to provide reliable data. All data is as of Q1 2019.

The figure below shows comparisons between vintages:

By looking at individual deals, Pantheon was able to draw more specific conclusions about outperformance based on company size tha......................

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