Over the past decade, the private equity (“PE”) industry has battled volatility and change, however it has proved remarkably resilient over the decade’s second half, armed to weather the storm and generate net positive cash flows amid economic booms and busts.
According to Bain & Company’s recent private equity report, PE’s vital signs remained strong in 2015 despite global economic expansion showing signs of strain amid continued record-low interest rates and increased volatility in public equity markets. Unstable deals done at the peak of the bottom proved much stronger with revised capital structures and better growth prospects. This period of economic stability led to rising global equity markets, large corporate cash balances, and a flood of exits at favorable rates of return.
Exits in 2015 experienced high volumes of corporate merger and acquisition (M&A) activity as cash-rich strategic acquires set out to buy growth. PE firms of all sizes, areas of focus, and performance track records widened their performance edge over public markets, thereby reinforcing investor confidence and hitting or exceeding target goals. In addition, new investment by PE funds remained strong despite record-high asset valuations and growth volatility in the debt markets as general partners (“GPs”) discovered new ways to invest capital.
As the new year begins, leading PE firms are preparing for future economic woes by digging deep into their past successes and understanding the unique skills that will enable them to create value across their portfolios as industries are disrupted and the economy reshaped.
Access the full Bain & Company Global Private Equity Report 2016 at http://www.bain.com/bainweb/publications/global_private_equity_report.asp