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 10, 2021
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.
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%
As the private equity industry surges on, learn how you might benefit from a reliable and experienced third-party partner.
U.S. Bank offers specialized expertise and a continued investment in this business to support your private equity funds. We’re committed to bringing you the most proactive and comprehensive solutions to meet the growing demands of the private equity industry. Learn more about our fund administration services by visiting 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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