U.S. private equity deal activity is off to a slow start in 2019 due to poor performance in leveraged loan and high-yield markets in the fourth quarter, according to a report from PitchBook.
The report shows that general partners closed on 993 deals totaling $121.4 billion in the first quarter, down 27.9% and 26.7% from the first quarter of 2018, respectively.
U.S. private equity deal activity reached a record 5,006 deals totaling $716.8 billion in all of 2018, up 6.9% and 16.7%, respectively, from the year before.
"After 2018's blistering pace of deal-making, 2019 has gotten off to a sluggish start. Poor performance in leveraged loan and high-yield markets during 4Q 2018 had an adverse impact on the cost of deal financing, causing many GPs to hold off on finalizing deals," the report said. "These deals often take months to close, and difficulty securing financing is often evident in lower deal flow the following quarter."
Fundraising, however, is on track to match 2018's total of $180.7 billion raised through 194 funds, with $45.5 billion raised across 29 funds in the first quarter.
Private equity exits slowed down in the first quarter following a strong second half in 2018, with GPs exiting 164 companies for a total of $41.1 billion, representing quarter-over-quarter decreases of 41.2% and 57.3%, respectively. However, despite the decline in exit count and value, the report shows that the median exit size remains at $287.5 million.
The first quarter saw just one private equity-backed initial public offering, the lowest since the first quarter of 2009. The report notes that this is partially due to fourth quarter market volatility and the U.S. government shutdown, which delayed some offerings.