Global Private Equity Report 2017

Bain's Global Private Equity Report 2017, published in February 2017, found that the private equity industry posted solid results in 2016 despite volatile markets early in the year. Returns continued to outperform public markets by a sizable margin over both short- and long-term horizons, and fundraising surged as limited partners recycled distributions into new commitments. Global buyout activity declined, however, as persistently high asset valuations and competition from corporate buyers, alongside macroeconomic and political uncertainty, made deal-making difficult.

Exit value fell from record levels in 2014 and 2015, but the report characterizes the $328 billion in disclosed buyout-backed exit value from 984 deals as an extremely strong result, the fourth-best year by value on record. North America led with $182 billion across 437 exits. Europe was hit harder, with exit value down 28% amid sovereign debt concerns, bad bank loans, migration and Brexit uncertainty; including minority stakes and public share sales, overall European exit value reached $74 billion, down 20%. Asia-Pacific IPO value fell to $29 billion, 24% below the 2011-2015 average, according to AVCJ.

Bain attributes the decline to the digestion of the pre-crisis deal backlog. Less than 10% of pre-crisis capital remains unrealized, and nearly 70% of unrealized deals from 2008 or earlier are held below cost, according to Cambridge Associates. Median holding periods have settled at roughly five years, versus more than six in 2014, and the report expects longer holds to persist because GPs must work to improve assets bought at high prices.

Strategic sales remained the dominant exit channel, though buyout-backed exits to strategic acquirers fell 17% in count and value. Public-market exits were weaker, with IPOs down 40% by count and 48% by value, though notable listings included Athene Holding, US Foods, ConvaTec, Nets and ZTO Express. Sponsor-to-sponsor deals benefited from weak IPO conditions, led by the $7.5 billion sale of MultiPlan to a Hellman & Friedman, Leonard Green and GIC consortium. Carlyle's sale of its remaining Axalta Coating Systems stake in 2016, its second-largest profit on a deal, illustrates follow-on sales as a further source of distributions.