Private equity deal value hits $1.1 trillion, smashing previous record

28 March 2022 5 min. read

2021 was a record-breaking year for private equity deal value, according to Bain & Company research, although merely saying that a new record was set hardly does the industry justice. Eight charts on the industry’s record smashing year.

In 2021, global buyout deal value ended the year at $1.1 trillion, double 2020’s total of $577 billion and shattering the old record of $804 billion set back in 2006 during the exuberant run-up to the global financial crisis.

Global buyout deal value 2022

Around one in three deals last year involved a technology company (which also includes the software and solutions segment).

Global buyout deal count, by sector

Counting the growing number of tech-driven sectors, like fintech and healthech, where outperformance is increasingly a function of technology expertise, the share of technology could represent around half of all deal value.

Buyouts of tech-enabled businesses have tripled over the past five years

The number of mega deals ($1 billion-plus) roughly doubled, helping increase average deal size by 57%, pushing it past the $1 billion threshold for the first time since Bain & Company has been tracking the data in 2000.

Capital is flowing toward ever-larger deals, pushing average deal size above $1 billion for the first time in 2021

As a result of the private equity deal boom, the share of private equity in the total M&A market increased to around 19%, its highest level since 2006.

As global M&A value shot to its own record in 2021, private equity’s share of the total continued to rise

Deal drivers

According to Bain’s analysis, the stunning increase in 2021’s private equity deal value owes to a number of factors. The first: 2021 saw a large number of catch-up deals – those planned to close in 2020, but postponed to last year due to the Covid-19 crisis.

Figure 8: The stairstep increase in unspent capital resulted in another record in 2021, increasing pressure on private equity firms to do more deals. Met text legenda rechts maar niet 2021 vs. 5-year avg.

The pandemic meanwhile created a burst of activity in two sectors: technology and healthcare & life sciences, which lifted overall deal activity. Third, the amount of capital available at private equity firms (‘dry powder’) reached another record ($3.4 trillion) – pressuring investors to put that money to work.

Raising funds

In a year marked by new records set, private market fund-raising didn’t disappoint, finds Bain & Company’s report. Global funds raised across the full private capital spectrum hit $1.2 trillion, a 14% increase from the 2020 total and the highest level ever reached.

Amid a record-setting year in global private capital raised, buyout held its own, but venture and infrastructure funds stood out

Buyout funds raised $387 billion in 2021, their second-best year ever. But growth, venture, and infrastructure all grew faster relative to their five-year averages.

North America, particularly the United States, remains the world’s largest market for raising equity funds.

Buyout funds posted their second-best fund-raising year ever, and the capital is targeted largely at major markets

2022 outlook

Commenting on the outlook for 2021, Hugh MacArthur, global head of Bain & Company’s Private Equity practice said: “2022 will continue to be a busy and exciting time for the private equity industry.”

“But given the high prices being paid for acquisitions, there will inevitably be an increase in pressure on deal sponsors to deliver results this year. For dealmakers, it is critical that they fully understand the microeconomics of the sector, the value creation levers available to pull and the risks they’re under writing.”

In addition, MacArthur advises dealmakers to keep a close eye on the impacts of the Ukraine crisis. “The Ukraine conflict adds many dimensions to the global macro picture. Ripple effects from the Ukraine conflict will be felt far and wide. So private equity investors and their portfolio companies will need to plan for a wider-than-normal range of scenarios and watch closely as events continue to unfold.”