Private Equity Investments - Trends

PE, Investments – Untapped Market potential…


When measured as a percentage of overall economic activity, private equity accounts for over 0.5% of GDP in just five countries10—the UK, Israel, Sweden, Australia and the US. Only in the UK is private equity activity worth more than 1% of GDP. Bringing other OECD countries up to that simple benchmark would add almost US$200bn to the value of private equity activity worldwide.

Private equity is an industry that is still heavily concentrated in two economies, the United States and the United Kingdom. Eight out of the top ten global private equity firms, measured by capital under management, are all American, or have a strong American presence.

Venture capitalists and mid market firms are most optimistic amongst private equity firms, with over three quarters (77%) of venture capitalists and over half (53%) of mid-market firms predicting higher or the same returns in 2008, according to a European survey of the trends and issues facing the private equity industry published today.

The buyout sector is concentrated predominantly in the US, the world’s largest private equity market, and the UK, Europe’s pre-eminent market. The growth opportunities represented by the globalization of the industry beyond these two countries are huge.

Although private equity firms now control a host of household names, they still lack the financial clout to take aim at the largest buyout opportunities. The top buyout firms clearly now have the resources to get access to US$10bn-plus deals. But these deals are still at the mid-cap level, well short of the megadeals available to the largest trade buyers.
The industry will continue to achieve dramatic rates of growth. The arrival of the first US$20bn fund is likely over the next five years.

Levels of private equity activity could easily rise by more than US$50bn in continental Europe alone. It is only a matter of time before private equity-backed takeovers of S&P500 and FTSE 100 firms Unlocking global value Future trends in private equity investment worldwide.