A Record-Breaking Year for PE: Pitchbook’s Q2 Report


August 18, 2021

By: Kyle Johnson

With PE funds fighting an uphill battle last year amid a global pandemic, Q2 2020 industry reports were shrouded in uncertainty. Across the globe, organizations fought against a looming economic collapse as businesses folded and life as we knew it shut down for months.

Despite the shifting tides, we witnessed first-hand the resilient nature of the private equity industry. Around this time last year, we published our analysis of the National Bureau of Economic Research’s study on PE and financial fragility that found that PE-backed companies were more resilient and rebounded more quickly than their non-PE-backed peers during the crisis.

One year later, we’re seeing that the study held up…and then some. In the last 18 months, the PE industry has shown tremendous growth despite an ever-changing economic environment. In PitchBook’s Q2 2021 US PE Breakdown, it was reported that middle market and billion-dollar deals are reaching unprecedented levels “thanks to the speedy economic recovery, demand for high-yield debt, an abundance of dry powder, and the looming threat of a capital gains tax hike.”

The report outlined how surging LP activity has brought not only the PE industry but also those it supports from harrowing lows to meteoric highs in just a few months. Here are some key highlights from Pitchbook’s Q2 findings:

Overall Market Trends: A Record-Breaking Year

  • PE firms have closed on 3,708 deals worth $456.6 billion in H1, which is about two-thirds of the total deal value for 2020. H1 2021 is also on track for a record-setting year in PE exit deals.
  • The Q2 inflation pop is signaling a move toward a potential rate increase by the end of 2023. The core consumer price index increased by 3.8%.
  • The White House’s proposed increase from 20% to 39.6% in the marginal capital gains rate has “spurred a dealmaking frenzy.” Pitchbook is seeing business owners race to realize profits from sales before the end of the year.

Areas of Growth: The Driving Factors

  • Funds worth $5 billion or more (“mega-funds”) accounted for the bulk of capital raised, “but both middle-market managers and first-time funds are also finding success as the increased appetite for PE benefited funds of all sizes.”
  • Corporate bonds and private debt also accrued significant activity in Q2.
  • Investment in cybersecurity is on the rise. PE dealmaking in software continued to post was strong in Q2 2021 and cybersecurity emerged as a particular area of focus. This makes sense, as the pandemic also engendered an increase in remote-work-related cybercrime.
  • Distributions to LPs and high returns numbers across all fund sizes are set “to provide additional tailwinds” moving forward. Also, platforms that saw significant expansion under PE sponsors are now coming to market and achieving healthy valuation step-ups.

As our economic recovery continues, many PE firms and PE-backed companies can start to look past pandemic-related issues and get back to their missions: building and scaling stronger businesses. Having the hard data to demonstrate the powerful buoyancy of private equity, we can move forward confident that it’ll take more than a sudden recession to curb this industry.

To read the full Q2 report, visit Pitchbook’s site here.

Interested in gaining more detailed Q2 insights? Check out our Q2 report here.