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Alternative Market Briefing

2021 private equity deal value crosses $800bn, breaking the 2007 record of $712bn

Friday, January 21, 2022

Laxman Pai, Opalesque Asia:

Negative real interest rates bolster strong position for private equity, despite inflationary concerns, as the deal and exit values in the asset class soared in 2021, and public-to-private transactions are expected to account for a growing share of future deal flow.

"After a surprisingly resilient 2020, private equity deal flow came roaring out of the gates in 2021, as fund managers looked to deploy record amounts of investor capital, while also taking advantage of buoyant listed equity markets to exit existing positions," said the 2022 Global Private Equity Report published by Preqin.

Around 8,000 deals are expected to have been completed, conservatively annualizing data to October 2021, with a combined value of more than $800bn, breaking the 2007 record of $712bn, the report pointed out.

The report also found that private equity returns continue to outperform public markets, with the global private equity funds tracked by Preqin having achieved a net initial rate of return (IRR) of 18.8% over the five years to March 2021.

The surge in private equity investment activity has been supported by a virtuous circle driving the asset class to new heights. Low-interest rates are incentivizing additional investor allocations, keeping buyout financing costs low, and sustaining buoyant valuation multiples.

However, there may be signs that the early-2021 boom in risk assets could be starting to moderate, with fundraising softening from Q3 20......................

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