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Laxman Pai, Opalesque Asia: According to a study by Bain&Co, the private equity (PE) exit activity in 2020 followed the same pattern as investments. Both buyers and sellers hunkered down when the Covid-19 pandemic hit in the spring, and second-quarter activity went into a skid.
But exit value picked up in the second half, as revived price multiples and the threat of a tax-law change in the US gave sellers ample incentive to put companies on the market?€?particularly big ones.
The number of exits trailed 2019's total, but owing to an increase in deal size, global exit value hit $427 billion in 2020, on par with 2019 and in line with the five-year average.
Once again, strategic buyers provided the largest exit channel. Sponsor-to-sponsor deals held up well, and initial public offerings increased by 121% to $81 billion as public equity markets soared.
Firms also leaned heavily on partial exits, as GPs sought to keep a stake in attractive assets rather than have to hunt down new prospects in a highly competitive deal market. Overall, the median holding period for companies that exited in 2020 was 4.5 years, slightly higher than in 2019 but in line with the five-year average
Private equity survived without taking a hit to returns
By all indications, private equity weathered 2020's perfect storm without taking a hit to returns. Looking at 10-year annualized internal rates of return (IRR) , funds have so far avoided the kind of damage suffered in t...................... To view our full article Click here
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