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Buyout-backed private equity exits hit record in 2014: Bain & Company

PRIVATE equity (PE) exits surged in 2014 with buyout-backed exits hitting record highs worldwide, an annual report by Bain & Company showed on Wednesday.

Exit value stood at US$456 billion, shooting past its previous record of US$354 billion in 2007. It was also up 67 per cent from 2013.

The number was amplified by sales of a handful of very large assets to strategic acquirers, as well as a strong initial public offering (IPO) market in the first half of last year. In particular, there was a doubling of buyout-backed IPOs in Europe, in both volume and value terms. In Asia-Pacific, PE-backed IPO value almost quintupled to US$63 billion, the report said.

In volume terms, the total 1,250 sales last year also surpassed its previous peak of 1,219 transactions in 2007.

But given the trillions of dollars of capital held by PE funds and investors, together with "plentiful, cheap debt", buyers were still faced with intense competition and inflated asset prices, Bain noted.

As a result, global buyout investment activity fell 2 per cent in value from a year ago to US$252 billion.

"Last year was undoubtedly the year of the exit, which raised the caution flag for many buyers," said Suvir Varma, head of Bain's Asia-Pacific private equity practice. "The surge in global liquidity and near-zero interest rates has inflated asset valuations and boosted acquisition multiples on private PE targets, which will make it more challenging to earn the same high levels of return going forward."

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