According to a report by SP Global Market Intelligence, 2021 saw investment activity in the private equity market graze past the trillion-dollar mark for the very first time. 24,520 deals, averaging to the tune of $1.04 trillion were closed. The growth of private equity is also reflected in deal volumes that grew by 41.65% over 2020.
The bullish uptick in private equity investment deals in the LatAm region stood at a whopping 225% rising in value from $6 billion in 2020 to $19.5 billion in 2021. Likewise, North America clocked in a 111% increase in deal value
The inflection point for private market assets had already rolled into motion in 2019. According to McKinsey’s Private Markets Annual Review – Private Assets Undermanagement (AUM) in the US grew by 10% in 2019, and $4 trillion or 170% over the last 10 years. Interestingly for the same period, the global public market AUM grew roughly 100%, and in contrast, the number of publicly-traded companies in the US stayed flat with a 40% dip since 2000.
The COVID factor too played a huge role in speeding things up. Though for the first three months of 2020, dealmaking was forced to a grinding halt – stimulus packages from central banks from March 2020 onwards helped in keeping up the momentum. With considerable amounts of unutilised capital, private equity investors were faced with better conditions to buy and sell companies. In fact, the average deal size exceeded $1 billion in 2021 for the first time.
The global impetus for private equity funds and markets comes from the perceived low volatility and high returns among existing and new institutional investors. There are also tax advantages to look forward to along with fewer restrictions than trading in the public market. Today, the private equity space has also opened up to retail investors too.
Even businesses seem to be gravitating towards private equity funds to raise money. As an alternative fundraising avenue, businesses can now bypass tedious bank loan processes or needed to offer their company to a public stock market. Another advantage for businesses is that they can focus on the long-term growth plan than just short-term quarterly growth. Even family offices have upped their allocation to private equity.
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