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Highlights:

– $100 Billion Carlyle Target is a Bullish Sign for PE
– Public Market Frustration Leads to Record Tech Fund
– 2016 Dividend Recaps Eclipse Last Year’s Amount
– UK Lower Midmarket PE Purchases Hit Post-GFC High
– Third Quarter Scorecard for Unicorns
– PE KeyTrends Quick Question Results



“A BULLISH SIGN” FOR PRIVATE EQUITY “IF EVER THERE WAS ONE.”
That’s how Bloomberg describes Carlyle’s goal of raising $100 billion over the next four years. For context, $466 billion was raised across all PE fund strategies in 2015, the third largest amount ever. Indeed, Carlyle’s confidence dovetails with a range of reports indicating that a majority of PE investors intend to increase their exposure to the asset class. As Carlyle co-founder David Rubenstein says, there’s nothing “heroic” about the $25 billion-a-year pace his firm is targeting, given its track record of collecting nearly $80 billion in the three years through 2015. A broad swathe of PE managers “will find themselves further in favor” as investors respond to PE’s promise of “outsized returns in a persistent low-interest rate environment,” notes Bloomberg. Watch for new fundraising highs.

BLOOMBERG



“FRUSTRATION” WITH PUBLIC MARKETS LEADS TO A RECORD TECH FUND.
The launch of the Softbank Vision Fund is another sign of the growing weight of private equity capital, and in particular venture capital, in the world of finance. Seeded with about $25 billion from Softbank and as much as $45 billion from Saudi Arabia, the fund will seek $30 billion from other investors. At an unprecedented $100 billion, the vehicle “would be the same size as all funds raised by U.S. venture capital firms over the last two and a half years,” notes the Financial Times. Its investment pace of $20 billion annually would equal approximately a fourth of annual investments in venture-backed startups in the U.S. Masayoshi Son, Softbank’s founder, was driven to create the megafund by one basic issue, observes a second FT story: Stock investors “take too long” to understand the “big, crazy ideas” of venture capitalists and entrepreneurs. Although pundits predict trouble for privately-held startups worth $1 billion or more – known as unicorns – news of the megafund lends credence to the idea of a vast PE market increasingly able to support exceptionally large companies.

FINANCIAL TIMES
FINANCIAL TIMES



DIVIDEND RECAPS ARE RISING, DRIVEN BY THE FALL IN IPOs,
reports Bloomberg. As jittery stock markets limit the ability to cash out of investments through initial public offerings in 2016, ‘dividend recaps’, or loans taken out by portfolio companies in order to make payouts to private equity investors, have increased significantly. Through late October, PE-owned companies distributed $30.5 billion in dividend recaps, surpassing 2015’s full year total of $27.3 billion. At the current pace, 2016 will see $37.7 billion in dividend recaps, the fourth largest annual sum ever, though well below 2013’s record of $54.4 billion.

BLOOMBERG



PE IN THE UK MID-MARKET HITS A POST-FINANCIAL CRISIS HIGH,
reports Private Equity International, citing research from Lyceum Capital and Cass Business School. PE-backed purchases of majority stakes in firms with an enterprise value – equity plus debt – of between £10 million and £100 million hit £2 billion, the most in any six-month period since the first half of 2008. Britain’s vote in June to leave the European Union aided materially. It kicked off a sharp drop in the value of UK currency, making the country’s lower middle market a particularly “attractive hunting ground” for bargain investments.

PRIVATE EQUITY INTERNATIONAL



VENTURE BEAT’S THIRD QUARTER ‘SCORECARD’ FOR UNICORNS,
or privately held companies worth $1 billion or more, is here. It reveals that there were nine new unicorns globally in the third quarter. A particularly international group, they include Ubtech Robotics, a Chinese developer of “intelligent humanoid robots;” Deliveroo, a UK-based European restaurant delivery service; Go-Jek, an Indonesian motorbike taxi service with 200,000 drivers; and Quanergy, a Silicon Valley company working on self-driving car sensors. The unicorn sector saw only one initial public offering and two acquisitions in the quarter, while there were 19 private funding rounds executed at higher prices than the previous round, 18 unchanged valuations, and just one private funding done at a lower valuation than the preceding round.

VENTURE BEAT


AND NOW THE RESULTS OF SOME OF OUR RECENT KEYTRENDS QUICK QUESTIONS:

  • 86 percent of respondents expect ‘public-to-private’ PE acquisitions to significantly increase over the next 12 months.
  • 33 percent of respondents say the number of women executives in their firm has increased materially over the last three years.
  • 75 percent of respondents who invest in venture capital don’t own stakes in early stage funds known as accelerators.