Private equity buyouts decrease, shrink in size in 2008

Difficult financing conditions continued to soften global buyout activity for private equity firms, with deal volumes plunging 72 percent in the first nine months of 2008. The oil and gas and mining sectors as well as Japan, India and the Middle East remained bright spots.

Global private equity dealmaking continued to shrink both in volume and in size as private equity buyouts plunged 72 percent over the last year and deals under $1 billion (€719 million) accounted for nearly half of that volume, according to new data released by market data provider Dealogic.

Global financial sponsor buyouts reached $178.2 billion in the first nine months of 2008, representing a 72 percent drop over the comparable period in 2007, when $625.4 billion of deals were announced.

With global buyouts topping $2.84 trillion in the first nine months of 2008, the second-highest nine-month figure on record despite a difficult credit environment, financial sponsor-led mergers and acquisitions represented 6.3 percent of the total activity, versus 16.9 percent over the same period last year.

The size of deals has decreased along with deal activity. Deals under $1 billion accounted for 48 percent of private equity buyouts, compared to 21 percent in the same period for 2007, according to Dealogic.

Forty-one private equity buyouts over $1 billion were announced, of which only one topped $10 billion: the recently announced $10.5 billion acquisition of Constellation Energy by Electricite de France, KKR and TPG, which was eventually topped by a competing bid from one of Warren Buffet’s portfolio companies. These figures compared to 105 deals that totalled more than $1 billion and eight deals that totalled more than $10 billion during the same period in 2007.

Private equity loan volume also was down significantly, totalling $191.6 billion in the first nine months of the year, or 77 percent less than the $827.5 billion lent to private equity firms in the same period last year.

Despite these bleak figures, there were some bright spots.

Geographically, Japan, the Indian subcontinent and the Middle East experienced increases in deal volumes. And in terms of sectors, the oil and gas and mining sectors saw significant increases in buyout volumes.

And while deal activity may have slowed down overall, the biggest players in the industry continued to keep busy. TPG Capital, Kohlberg Kravis Roberts and The Carlyle Group, respectively, topped the rankings of announced M&A volume, with 32 deals totalling over $35.3 billion.

In terms of completed deals, though Bain Capital Partners, Apollo Advisors, and TPG Capital, respectively, came out on top, with 17 deals totalling $90.8 billion. 

Top 10 private equity firms by announced M&A buyout value
Rank

Private Equity Firm

Value ($bn)

No. of Deals

 1

TPG Capital

14.8

 2 Kohlberg Kravis Roberts

11.3

 3 The Carlyle Group

9.2

21

 4 Bain Capital Partners

8.3

 10

 5 Goldman Sachs Capital Partners

7.8

3

 6 The Blackstone Group

7.7

13

 7 First Reserve

6.2

9

 8 CVC Capital Partners

6.0

4

 9 Hellman & Friedman

5.5

7

10 Avista Capital Partners

4.6

 3

Source: Dealogic

Top 10 private equity firms by completed M&A buyout value
Rank

Private Equity Firm

Value ($bn)

No. of Deals

 1

Bain Capital Partners

34.0

 11

 2 Apollo Advisors

29.4

5

 3 TPG Capital

27.4

1

 4 Thomas H Lee Partners

25.6

 2

 5 BC Partners

18.1

2

 6 GIC Special Investments

11.0

3

 7 First Reserve

8.6

9

 8 Goldman Sachs Capital Partners

8.1

4

 9 Apax Partners

7.7

7

10 The Carlyle Group

7.0

 17

Source: Dealogic