After a slump in transactions caused by the COVID-19 pandemic, the largest private equity managers "sprinted to the finish" in the second half of 2020, according to the latest global private equity report by Bain & Co. released Monday.
Private equity firms closed a total of $592 billion in deal value in 2020, up 8% from 2019 and 7% higher than the five-year average of $555 billion, the report said. The number of deals was down 24% in 2020 from a year earlier, it said.
"The reason total deal value rose in 2020 while volume slipped was a 24% increase in average deal size to $776 million," the report noted. "That reflects the ongoing concentration of the PE (private equity) industry — bigger funds have to do bigger deals to move the needle for investors."
Meanwhile, the percentage of debt used in buyout transactions accelerated in 2020 with nearly 80% of transactions leveraged at more than six times earnings before interest, taxes, depreciation and amortization. More than two-thirds of all U.S. buyout deals had purchase prices of more than 11 times cash flow.