Private equity industry on pace for best year in history

27 July 2021 3 min. read
More news on

The global private equity industry is on its way towards an extraordinary rebound from the Covid-19 crisis. According to a new report by Bain & Company, 2021 is setting up to be the best year in the industry’s history by far.

This time last year, not many people would have predicted private equity to be one of the hottest sectors in the Covid-19 recovery. 12 months later, though, investors can look back at a torrid first half of the year. Globally, private equity generated $539 billion in deal value during the first six months of 2021 alone. 

That’s on par with the industry's full-year average from 2016, and just $6 billion below the full-year total set in 2019. If things continue at this pace, 2021 is on track to top $1 trillion for its annual haul, something never seen before in the private equity market. The performance would dwarf the previous record of $804 billion, set in 2006, as the industry peaked before the global financial crisis. 

Global buyout deal value

Bain & Company’s analysis shows that deal size, not deal count, is behind the increase in value. The number of individual deals has tracked up 16%, compared with the first half of 2020 after falling well short of the long-term average of 4,000 in 2020. But the average deal size spiked by 48%, from $718 million to $1.1 billion.

From a sector perspective, the technology sector dominated deal activity. One in every three buyout deals in the first half involved a tech company, most notably in the software space – by no means a surprise on the back of the digital acceleration seen during the pandemic.

Any way you look at it, the private equity industry is supersizing

“That probably understates tech’s growing appeal to investors," according to Hugh MacArthur, a Partner in Bain & Company’s Private Equity practice. He added that "tech deal numbers often leave out subsectors like FinTech, tech-enabled services, and healthcare IT, which also drew heavy interest from private equity investors. Given that tech means growth and growth means higher multiples, the bias toward investing in these sectors will likely continue in the months and years ahead.”

$1.2 trillion in funds on their way

Despite sitting on record levels of dry power – funds still not put to use by investors – private equity funds are predicted to receive a record amount of fund-raising this year: over $1.2 trillion. If that bears out, it will set a new single-year record. 

Global private capital raised, by fund type

Notably, in the first half of 2021 mega-funds drove much of fund-raising activity, with nine $5 billion-plus funds taking in more than half of all buyout capital raised. The mega-funds are all led by household names in the industry such as EQT, KKR, CD&R and Bain Capital, and they raised 17% more than they targeted, on average. 

Looking ahead, Bain & Company expects the momentum seen in the first half to continue well into 2022. MacArthur concluded, “The forces that drove the first half’s extraordinary activity – supportive monetary policy, a relatively strong economy, soaring equity markets, and a mountain of dry powder – show no signs of weakening. While our crystal ball is as fuzzy as everybody else’s, the winds seem favourable."