Middle Market M&A Update – April 2014
As we wrap up the first quarter of 2014, the IPO market continues to flourish with over a dozen companies going public in the last week of March. 72 companies went public on U.S. exchanges last quarter, marking the largest number of new Q1 issuers since 2000. Private equity firms continue to capitalize on this public exit opportunity, taking advantage of buoyant markets to sell investments. The favorable lending environment and sustained stock prices have created an ideal environment to cash out of investments.
Pitchbook reports that private equity firms invested $152.5 billion into 850 transactions, compared to $137 billion into 956 transactions in Q1 2013. It also reports that PE firms raised $62.1 billion for 91 funds in Q1, compared to $53.5 billion for 80 funds in Q1 2013. As was the case in 2013, private equity funds are returning near record levels of cash to their investors.
The biggest challenge for buyout firms in 2014 is finding quality deals to put money to work in a highly competitive market. A report from Bain & Company estimates that private equity firms were sitting on more than $1 trillion in available capital at the end of 2013. With a smaller pool of quality assets, competition will continue to push valuations higher. The number of Q1 global M&A deals is down 14% from 2013 (lowest level of deal-making since 2003).
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