At a Glance
- Private equity experienced unprecedented growth, fueled by pandemic-related stimulus and a surge in dealmaking.
- Non-buyout categories like growth equity and venture capital saw significant activity increases.
- Global expansion drove impressive returns, though rising inflation signaled potential challenges ahead.
Private equity redefined excellence in 2021, setting records across buyout deals, exits, and fund-raising. Despite economic uncertainties from the pandemic, the industry demonstrated resilience and adaptability.
Key Trends Shaping Private Equity
- Historic Deal Value: Buyout deal value doubled from 2020, surpassing $1 trillion for the first time.
- Focus on Technology: Over 30% of buyouts involved tech companies, reflecting a shift toward digital growth.
- Rise of Specialization: Investors pivoted to niche sectors like fintech, healthcare tech, and infrastructure.
Investments: A Year of Supersized Deals
Private equity deal value reached $1.1 trillion globally, with North America leading at $537 billion. Average deal size exceeded $1 billion, driven by:
- Public-to-Private (P2P) Surge: $469 billion in P2P transactions, particularly in tech.
- Sector Dominance: Technology accounted for 33% of buyouts, with higher valuations justifying growth bets.
Figure: Buyout deal value by region (2021 vs. 2020)
| Region | 2021 Deal Value (USD Bn) | Growth vs. 2020 |
|----------------|--------------------------|-----------------|
| North America | 537 | 2x |
| Europe | 298 | 1.8x |
| Asia-Pacific | 265 | 1.7x |
Exits: Capitalizing on Optimal Conditions
Exit markets mirrored investment vigor, with $957 billion in global buyout exits. Key channels included:
- Corporate Acquisitions: $458 billion (50% of total exits).
- Sponsor-to-Sponsor Deals: $228 billion.
- SPACs: $158 billion, despite volatility.
👉 Explore how SPACs are reshaping private equity exits
Fund-Raising: Investors Bet on Expertise
Private capital raised hit $1.2 trillion globally. Buyout funds secured $387 billion, while growth and infrastructure funds grew faster. Notable shifts:
- LP Preferences: 88% of LPs plan to maintain or increase PE allocations.
- Bigger Funds: Top 20 managers averaged $17 billion per flagship fund.
FAQ:
Q: Why are LPs favoring specialized funds?
A: Sector-focused funds (e.g., tech, ESG) offer differentiated returns and align with LP allocation strategies.
Returns and Risks: Navigating Inflation
Private equity outperformed public markets, but inflation looms:
- Top-Tier IRR: 20%+ for leading funds.
- Inflation Impact: Rising rates may compress multiples, requiring new value-creation strategies.
👉 Learn how top funds adapt to economic shifts
Asia’s Ascendance
Asia-Pacific now commands 30% of global AUM, driven by tech and venture growth. Highlights:
- Tech Dominance: 50% of regional deals were tech-focused.
- Key Markets: Greater China ($128Bn) and India ($61Bn) led activity.
Figure: Asia-Pacific vs. Global Venture AUM (2021)
| Metric | Asia-Pacific Share |
|-----------------------|--------------------|
| Venture Capital AUM | 46% |
| Growth Equity AUM | 52% |
ESG: Bridging the Measurement Gap
70% of LPs integrate ESG into policies, yet reporting challenges persist:
- Data Shortfalls: <25% of GPs track carbon emissions consistently.
- Innovation: Tools like Persefoni and EcoVadis help quantify ESG performance.
Quote: "Action is better than waiting for perfect answers. Start measuring and improving now."
Outlook: What Lies Ahead
- Continued Tech Focus: Digital transformation fuels dealmaking.
- Inflation Management: GPs must develop strategies for higher-rate environments.
Final Thought: Private equity’s 2021 success underscores its adaptability—but the future belongs to those who innovate.