May 4, 2012 – The Private Equity Growth Capital Council’s Private Equity Index (PE Index) fell to 87.1 during the first three months of 2012. The computation, which measures overall private equity activity in the U.S., fell 16 percent from the previous quarter. The quarterly change in the index’s value is driven primarily by sharp declines in private equity deal volume during the quarter. For the first time since 2010, the U.S.-based index fell below its 10-year moving average but still above index levels in late 2008 and early 2009.
“The current value of the PEGCC Private Equity Index reflects large reductions in deal volume and smaller declines in fundraising and investment exits,” said Bronwyn Bailey, PEGCC Vice President of Research. “The movement in the index is unsurprising, given the low deal volumes observed during the first three months of the year. Coming off a strong fourth quarter, we don’t expect that lessened activity in the first three months signals a longer trend. Indications are that deal volumes will pick up to their normal pace through the first half of the year, despite continued difficulty in accessing credit,” Ms. Bailey concluded.
Key findings about private equity activity in the first quarter of 2012 include:
• Average equity contribution by sponsors of U.S. leveraged buyouts increased to 44 percent in 2012-Q1, surpassing the 2011 level of 38 percent.
• U.S. private equity investment deal volume fell from $42 billion in 2011-Q4 to $13 billion in 2012-Q1.
• U.S. private equity fundraising volume declined by 17 percent from the previous quarter to $20 billion.
• U.S. private equity exit volume fell by 22% from the previous quarter to $24 billion.
Designed to provide an accurate snapshot of the state of the private equity market at any given point in time, the PE Index is a composite measure of global private equity activity based on three key factors: the dollar value of total private equity-backed investment, fundraising, and exits (portfolio company IPOs or sales to corporations or other investors). The Index measures 100 when all three components are at their ten-year moving average. These three factors collectively capture the most fundamental elements of the private equity market.
The Private Equity Index is calculated using data provided by Thomson Reuters, Pitchbook and Preqin. The Council updates the PE Index at the end of each quarter.