Buyouts boost PE/VC investments to record $12.9 billion in October

The value of PE/VC investments in October stood at a record $12.9 billion, up 71 per cent over the previous year, on the back of large buyouts. The month saw 127 deals, 28 per cent higher than last year (92 deals) but 5 per cent lower than the previous month (134 deals).

The cumulative PE/VC investments of $65.6 billion in CY21 are 38 per cent higher than the previous annual high of $47.6 billion seen in 2020, data from the latest IVCA-EY monthly PE/VC report shows.

The monthly value for pure play PE/VC investments (excluding investments in real estate and infrastructure) stood at a record $12.1 billion, almost 2.5 times the value recorded last year and forming 94 per cent of all PE/VC investments in October.

October saw 21 deals of value greater than $100 million aggregating to $10.9 billion. This includes the $3 billion buyout of Hexaware Technologies by Carlyle and Blackstone’s buyout of VFS Global Services for $1.9 billion.

By deal type, buyouts were the highest in terms of value in October at $6 billion across six deals. Next in line were start-up investments at $3.8 billion across 97 deals, the fourth consecutive month where investments were higher than $3 billion. Growth investments was at $1.7 billion across 13 deals followed by PIPE investments worth $1.3 billion across five deals.

Technology was the top sector in October, garnering $3.6 billion in PE/VC investments across 30 deals.

“The signalled intent of the main Central Banks to continue with their loose monetary policy has created a confluence of low discount rates and very liquid markets, which appears to have lifted all boats, and hence we are seeing a strong momentum not only in PE/VC investments but also in PE/ VC backed exits as well as widespread inflation in all kinds of assets. While several experts believe that this one-way street can’t continue for much longer and that the markets are looking for an excuse to correct, for now the momentum appears to be strong,” said Vivek Soni, Partner and National Leader Private Equity Services, EY.

October saw 24 exits worth $5.1 billion, taking the cumulative exits in CY21 to $38.7 billion, 43 per cent higher than the previous annual high of $27 billion seen in 2018.

Secondary sales via five deals in October accounted for $4.9 billion, or 96 per cent of the total value of all exits. The technology sector has accounted for 37 per cent, or $11 billion of all secondary exits by value since 2011 primarily due to a few large deals in CY21 totalling $6.3 billion.

"With high global liquidity and low interest rates lifting valuations across public and private markets alike, many PE/VC funds sitting on older vintage investments are using this opportunity to exit long held positions at reasonably good valuations." the report observed.

Further, with many companies choosing the IPO route to raise funding, large PE investors are actively looking for secondary deals especially in situations where financial sponsors hold majority control and where an IPO, though lucrative, is not a viable option for a complete exit given the size of their holding, said the report.