During the same quarter that economic growth slowed in the United States, private equity expanded to a level not seen since before the financial crisis. The Private Equity Growth Capital Council’s Private Equity Index (PE Index), which measures overall private equity activity in the U.S., increased 23 percent to 123.9 during the fourth quarter of 2012. This is the index’s highest level since the third quarter of 2008. A link to a free copy of the Private Equity Index is available at the end of this article.
“Private equity activity was a bright light in the United States economy during the fourth quarter, increasing investments in promising companies poised for growth and in need of a turnaround,” said Bronwyn Bailey, PEGCC Vice President of Research. “In the fourth quarter, economic activity receded, yet private equity investment topped $102 billion and returned more than $55 billion in the fourth quarter to its investors which include pension funds, charitable foundations and university endowments.”
Key findings about the private equity activity in the fourth quarter of 2012 include:
- Quarterly U.S. private equity investment deal volume increased from $66 billion in the third quarter of 2012 to $102 billion in the fourth quarter.
- Average equity contributions increased from 36 percent in the third quarter to 37 percent in the fourth quarter.
- Fundraising volume increased from $30 billion in the third quarter to $33 billion in the fourth quarter.
- Exit volume increased from $29 billion in the third quarter to $55 billion in the fourth quarter.
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.
The private equity industry in the U.S. comprises nearly 2,600 investment firms. They operate nearly 15,300 U.S.-based businesses in all 50 states and all Congressional districts. These companies employ approximately 8.1 million people. In 2011 alone, U.S. private equity firms invested nearly $144 billion in over 1,700 U.S.-based companies. The private equity industry has distributed over $1 trillion to its limited partner investors over the past three decades.
The Private Equity Growth Capital Council is an advocacy, communications and research organization and resource center established to develop, analyze and distribute information about the private equity and growth capital investment industry and its contributions to the national and global economy. Established in 2007, the PEGCC is based in Washington, D.C. (www.pegcc.org).
A free copy of the Private Equity Growth Capital Council’s Private Equity Index can be found HERE.
© 2013 PEPD • Private Equity’s Leading News Magazine • 2-14-13
