2019 Global Private Equity Outlook

Dechert and Mergermarket analyze the trends

As the global private equity market continues its ascent, creativity is emerging in a crowded market. Our report, in partnership with Mergermarket, surveyed 100 senior-level executives and identifies key trends.

Our survey finds that specialization and creative deal structures have become the norm,  and an overwhelming majority of respondents rate diversification or expanding beyond borders to be important. Expectations for the exit environment are split down the middle, with about half predicting a favorable environment.

Below are excerpts from the report's findings.

Ross Allardice and Markus Bolsinger preview the findings

Return expectations: trending up

In the years following the great financial crisis, private equity's ability to refinance and profitably sell assets acquired at the height of the credit boom was in doubt. However, the market's steep upward trajectory in recent years has been a huge boon for refinancings, exits and returns. When asked how return expectations on deals made 5-7 years ago had changed, well over half of respondents (59%) said expectations now exceeded initial forecasts.

Whether private equity is capable of repeating this success going forward is open to debate. The surfeit of capital looking to be put to work means that buyers are having to pay exceedingly full prices. Perhaps surprisingly, however, we found that GPs are broadly optimistic about return prospects going forward. Nearly half (48%) anticipate returns on capital invested this year to be higher than on capital invested 5-7 years ago, with only 15% expecting returns to fall.

The road ahead

Private equity finds itself at a crossroads. The outsized returns it has delivered for decades are under pressure from the sky-high prices that sellers demand today. For most, fundraising is not an issue – rather, putting that capital to work is more challenging than it has ever been. Under such conditions, it is imperative that firms develop new value-enhancement strategies and think carefully about where and how they make their next investments. Looking ahead to 2019, firms should be mindful of the following emerging and maturing trends.

  • Trump tariffs, retaliation and global trade
  • Heightened scrutiny of foreign buyers
  • Making the most of technology
  • Long-hold funds and asset diversification
  • Market impacts of tax reform
  • Seeking strategics

$528B

invested in 2017 buyouts

3,468

buyouts in 2017

1,083

exits in 2017

$258B

value of 2017 exits