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Alternative Market Briefing

Mid-market private equity deal activity blows past previous records

Friday, December 17, 2021

Bailey McCann, Opalesque New York:

Mid-market private equity deal volume is smashing records according to the latest data from PitchBook. By the end of the third quarter, deal volume had already surpassed that of the previous record year in both deal count and value. Sponsors are also exiting portfolio companies at a rapid clip - with a combined $184 billion in value through Q3-an annual record.

GPs are looking to get deals done while interest rates remain low. Data in the report shows that investors and sponsors alike are getting concerned about persistently high inflation and the impact that might have on margins.

A frothy market

Middle-market PE firms closed 2,847 middle-market buyouts in Q3 2021 for a combined $438.6 billion, Pitchbook said. Cumulative deal value is 50% higher than the next best four-quarter period, which was Q3 2018 through Q2 2019.

Anecdotal notes in the report highlight "auction processes with 20 or 30 bidders, businesses trading at previously unheard-of valuation multiples, and firms promising to close deals on truncated timelines-as short as a week or less-in order to sweeten their offers to sellers."

Deal activity is elevated across all sectors of the economy. In this environment, GPs are looking for companies that have the potential to capture long-term growth trends. Sponsors are beginning to worry ......................

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