Daily Management Review

Bain & Company: Total volume of dormant capital investment reaches record level


02/26/2018


Bain & Company has released a new report on the private equity market. The total volume of transactions increased by almost 20% compared to last year, to $ 440 billion. However, researchers note that the total amount of unclaimed capital reached a record volume of $ 633 billion. The authors of the report believe that such a significant reserve of accumulated reserves can shortly lead to major mergers and acquisitions.



Expect Best via pexels
Expect Best via pexels
Today, the international consulting company Bain & Company has published its annual Global Private Equity Report, dedicated to the activity of the global private equity industry following the results of 2017. Researchers noted that "the industry once again showed solid results, extending the five-year series of growth in the volume of attracted capital." The report stresses that "thanks to the enthusiasm of investors in the US, Europe and Asia, the largest investment pools have been formed, which gives good grounds for the industry's prospects in the coming years." At the same time, the researchers note that "the industry's inability to always use funds and make money work resulted in record stocks of unaccounted funds". There are $ 633 billion of dormant capital, of which more than a third ($ 286 billion) is in the largest funds of direct capital. This amount has been accumulated over the past five years, increasing by an average of 12% per year.

Nevertheless, following the results of 2017, the total volume of transactions involving direct investments amounted to $ 440 billion, which is 19% more than a year ago. The number of transactions (3077) was only 2%, more than in 2016, but 19% less than in 2014, when the peak of activity was observed.

Researchers of the consulting company note that it is necessary to search for objects for transactions more actively to use the large amounts of unencumbered capital funds and other participants of the direct investment industry. It is noted that more than 38,000 companies were sold or bought around the world in 2017, the aggregate amount of transactions was $ 3.3 trillion. However, the share of private equity funds in the total volume of all transactions in money terms was only 13%, and by the number of transactions even less - 8%.

The largest region in the world market of direct investments is traditionally North America. Last year, the total volume of transactions increased to $ 196 billion, including thanks to such large transactions as the purchase of the Sycamore Partners fund by the Staples retail network for $ 6.8 billion.

The European market is in second place in terms of volume. Total volume of deals amounted to $ 147 billion in 2017, including such large ones as the purchase by the American fund Hellman & Friedman of the largest Scandinavian payment operator, the Danish company Nets for $ 6.4 billion. The volume of transactions grew even in the UK by 7% to $ 39 billion, even though Brexit has significantly influenced the growth of negative sentiments of investors in other industries. Bain & Company experts explain this by the fact that investors working with the private equity industry are confident that, despite the temporary difficulties surrounding the country's withdrawal from the EU, London will retain its leading role in the financial markets.

Thanks to the mega-deal for the purchase of Toshiba's Toshiba Memory for $ 17.9 billion, a consortium of investors led by the Bain Capital fund and Apple by 74%, to $ 83 billion, the volume of transactions in the Asian region also increased.

source: bain.com






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