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Alternative Market Briefing

Private equity activity declines significantly in Q2 2020, dry powder climbs towards $1.5tn

Friday, July 10, 2020

Laxman Pai, Opalesque Asia:

The COVID-19 pandemic had relatively little effect on Q1 activity, not impacting European or North American countries until the end of the quarter, said Preqin.

However, the slowdown was very much evident in Q2, with fundraising and buyout backed dealmaking both seeing significant declines.

Just 225 funds closed globally, the lowest quarterly total seen in five years, and the $110bn they raised was the lowest since Q1 2018. This is also compared to 425 funds that secured$150bn in the equivalent quarter of last year.

Buyout-backed dealmaking also declined, with just 888 deals made for a total value of $61bn - around half the level of activity seen in Q2 2019. This is around half the activity seen in Q2 2019, when 1,567 deals were recorded worth a combined $115bn.

But dry powder has continued to climb, and now sits at an estimated $1.48tn, increasing the pressure on managers to find good opportunities. A decline in the targets of funds coming to market would also suggest that managers' attention is turning away from raising capital and towards deploying it.

Meanwhile, venture capital-backed deals were much more stable: 3,280 deals were recorded in Q2 ticking up from 3,099 the previous quarter. The $60bn in total deal value is up from $57bn in Q2 2019.

Looking ahead, there are 3,754 private equity funds in the market globally, seeking a total of $884bn. This is on par with the number of funds recorded in January (3,524), but a ......................

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