Private equity’s steady growth trajectory

As the market for private equity grows, it’s important to understand the numbers and history around this complex offering.

Tags: Hedge funds, Alternative investments, Administration
Published: February 26, 2020

As an industry, private equity has seen unprecedented growth and success — and it doesn’t seem to be slowing down any time soon. In fact, over the past five years, more money has been raised, invested, and distributed back to investors than in any of other period for the industry, according to Bain & Company.1

Whether your private equity firm is a multibillion-dollar shop or a boutique firm managing hundreds of millions in niche assets, it’s helpful to understand some of the milestones and growth statistics surrounding the private equity industry today.

 

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Private equity milestones2

The PE industry history is dotted with notable deals, for both corporations bought and sold and the PE firms that have gone public for greater capital access, including today’s largest three firms: Carlyle Group, Blackstone Group and KKR.

1946

American Research and Development Corporation (ARD) founded by Georges Doriot with the objective to “… aid in the development of new or existing businesses into companies of stature and importance.”

ARD’s first investment: $70,000 in Digital Equipment Corporation

1968
Digital Equipment Corporation goes public, making ARD’s stake worth $355 million

1976

Jerome Kohlberg, Henry Kravis and George Roberts found Kohlberg Kravis Roberts & Co. (KKR)

1980

Stanley Golder and Carl Thoma found Golder Thoma & Co. and popularize the “buy and build” model – a PE firm acquires a core company and subsequently expands it via add-on acquisitions

1985

Peter Peterson and Stephen Schwarzman found Blackstone Group

1987

Daniel D’Aniello, David Rubenstein and William Conway Jr. found Carlyle Group

1988

KKR’s leveraged buyout of RJR Nabisco sparks a wave of private equity acquisitions

2007

Blackstone Group goes public KKR, Texas Pacific Group and Goldman Sachs acquire TXU for $48 billion–the largest private equity buyout in history

2012

Carlyle Group goes public

2014

TXU, now known as Energy Future Holdings files for Chapter 11 bankruptcy

Striking growth since 20043

In addition to that notable history, assets under management (AUM) in the PE space are expected to maintain an impressive pace in the next half-dozen years, according to the PwC Asset and Wealth Management Research Centre.

Industry assets under management (AUM) levels (in trillions)

*Figure for this year is estimated.

2004: $1.0

2007: $2.5

2012: $3.3

2016: $4.7

2017*: $5.3

2020*: $6.4

2025*: $10.2

More private equity funds in the market4

The number of PE firms raising capital nearly tripled between 2014-19, according to Preqin.

Private equity funds in the market over time (as of January each year)

2014: 1,300

2015: 1,385

2016: 1,630

2017: 1,829

2018: 2,296

2019: 3,749

Add-on volumes rising5

A key part of the “buy and build” model is the acquisition of add-on companies by existing PE holdings. Such deals have soared in recent years, according to PitchBook's 3Q 2019 U.S. PE Breakdown Report.

Private equity add-ons over time

2009: 795

2010: 1,203

2011: 1,418

2012: 1,611

2013: 1,550

2014: 2,025

2015: 2,125

2016: 2,224

2017: 2,329

2018: 2,726

Taking external support6

To help streamline operations, PE firms are turning to third parties for myriad back-office chores, according to EY.

Percentage of firms surveyed that outsource the expertise to some degree

Tax: 94%

Regulatory reporting: 71%

Fund accounting: 55%

Investor relations: 38%

Treasury: 38%

Valuation: 30%

Accounts payable and time and expense: 29%

Portfolio analysis: 18%

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As the private equity industry surges on, learn how you might benefit from a reliable and experienced third-party partner.

 

To learn more about the comprehensive fund administration solutions offered by U.S. Bank, visit usbank.com/globalfundservices.

 

Sources:
1. Used with permission from Bain & Company https://www.bain.com/contentassets/875a49e26e9c4775942ec5b86084df0a/bain_report_private_equity_report_2019.pdf
2. Private Equity International. 
3. “Rediscovering alternative assets in changing times,” 2018, PwC. 
4. “Preqin quarterly update: Private equity and venture capital,” Q1 2019, Preqin. 
5. “3Q 2019 U.S. PE Breakdown Report,” PitchBook. 
6. “2019 Global Private Equity Survey,” EY.
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