New research by CEPRES across $16 trillion of PE-backed companies shows ‘Dry Powder’ is driving private equity pricing higher
NEW YORK, March 1, 2018 /PRNewswire/ — CEPRES released research today showing how the growth in so-called ‘dry powder’ is driving up EBITDA pricing multiples for US and European Buyouts. ‘Dry powder’ is a measure of how much capital remains committed by investors, but un-deployed in the market. Following multiple years of increased fundraising, especially in the US, the amount of capital available to invest in buyouts and venture capital is at unprecedented levels.
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The research was based on CEPRES award winning PE.Analyzer analytical platform. Now in its 4th generation it encompasses analysis of $16 trillion of PE-backed companies across 4,199 private capital funds. The analysis shows whilst US deals in the top quartile remain at steady but high pricing, pricing in the lower quartile has increased significantly in the last year and is converging with the market median as more money chases fewer deals in the market. In Europe where growth is not as positive as the US, the lower quartile of the market has softened, but the median and upper quartile deals remain highly priced. This is also fueled by a shift in asset allocations from LP investors who recognize the US has stronger medium-term growth potential than Europe.
The full report and analysis can be downloaded from: https://www.cepres.com/impact-dry-powder-private-equity-markets
Commentary:
“For Buyouts, EBITDA multiples are at their highest levels for over a decade and in the US we see a convergence of pricing in the lower half of the market. This could be a concern for investors who worry that IRR returns have reached their peak and may experience downward pressure in future years. With deals being priced so highly, investors are focused on higher growth markets because value creation will need to be driven by growth prospects rather than market pricing going forward. Thus we see investors starting to shift their asset allocation to the US which has stronger growth potential than Europe currently.
As always, we recommend investors to understand the true drivers of risk and returns of the markets they invest in and the GPs they commit to. Measuring and benchmarking fundamentals like deal pricing as well as risk adjusted alpha and beta correlation are critical for investors at this time.”
Dr. Daniel Schmidt, Founder & CEO CEPRES
About CEPRES
CEPRES is the world’s largest digital investment network and leading platform for private markets for 1,850 LPs, GPs and Advisors around the world. Through powerful analytics CEPRES clients make efficient decisions on trillions of dollars of assets to drive their investment success.
CEPRES combines the power of an innovative financial technology company with expertise in private equity. Through PE.Analyzer, an online investment decision platform and community network, CEPRES makes powerful investing easy for Private Equity and Private Capital Markets. For further information, visit www.cepres.com.
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SOURCE CEPRES
