Deloitte special: Private equity-led M and A

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Private equity-backed deal activity slowed in the first half of the year, as a number of macroeconomic factors blew a chill wind through the M&A community. 

Investment activity – measured by total deal value – dipped dramatically in the first quarter, falling from $74 billion in Q4 2015 to $32 billion in Q1 2016, according to data provider Dealogic. It subsequently rebounded in the second quarter to $79 billion. The number of transactions, however, remained relatively consistent, suggesting the lower end of the market remained unaffected.

The number of private equity exits dropped dramatically in the first quarter; just 199 deals were announced, compared with 272 during the previous quarter and 232 in the equivalent period last year. However, the value of the deals – and hence the amount of capital being returned to LPs – has slowed only gradually.

In Europe, Britain’s vote to leave the EU provides a clear culprit for slowing dealflow.

“If we look at our global pipeline for processes that are going to launch in Q4, then the UK is definitely under-represented,” says Stewart Licudi, head of European financial sponsor coverage at William Blair.

Manish Shah, a senior managing director in FTI Consulting’s transaction services group, adds: “Some of the deals we have been working on have been put on pause until the autumn. But there is no suggestion that they won’t be resurrected after the summer.”

This article is sponsored by Deloitte. It was published in the September supplement with pfm magazine.