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Private equity fundraising plummets in first quarter

U.S. private equity firms raised $36.6 billion in 55 funds in the first quarter of 2018, showing a sharp decline from a record-setting 2017, according to data released Thursday by PitchBook.

In all of 2017, 267 funds raised $242 billion, according to PitchBook.

Deal value also dropped precipitously in the first quarter, totaling $88.8 billion, 32.8% less than the year-earlier quarter. Deal flow fell by 4% from the first quarter of 2017, to 1,101 completed transactions.

The data said deal flow will rise in the coming months due to an estimated 124 deals worth an estimated $94.3 billion announced but yet to close.

Bifurcation defined the fundraising landscape, according to PitchBook data, as general partners have increased target fund sizes and many limited partners have increased private equity allocations and spread that capital among fewer managers. As a result, larger funds have become more popular and more common, with at least eight funds with target fund sizes of $1 billion or more, according to the report.

The median fund sizes as of March 31 for buyout funds and all private equity funds were $238 million and $252.2 million, respectively. Median fund sizes for buyout funds and all private equity funds at the end of 2017 were $300 million and $275 million, respectively. Those numbers were up from $250 million and $218 million, respectively, at the end of 2016.

In the first quarter of 2018, exit activity also tapered off compared with the past couple of years, according to the report, with $37 billion of value for companies exiting in 196 private equity deals. In 2017, there was $213 billion of value for companies in 1,179 deals, and in 2016 it was $215 billion in value for companies in 1,249 deals.

Exits by type stayed relatively consistent, with 48% of private equity-backed exits via secondary buyouts in the first quarter compared with 50% in 2017; 46% by corporate acquisition compared with 47% in 2017; and 6% via initial public offerings compared with 4% in 2017.