PE/VC investments drop 51% to $4.1 billion as big deals shrink in July

PE/VC investments in July 2020 stood at $4.1 billion, down by 51 per cent compared to $8.4 billion in July 2019. The decline was due to fewer large deals across segments. Nonetheless, if we exclude the investments in Jio Platforms, July 2020 has been the best month so far in 2020, recording investments worth $3.7 billion.

According to the IVCA-EY report, July recorded 10 large deals (value greater than $100 million) worth $3.1 billion compared to 13 large deals worth $7.1 billion in July 2019.

The largest deals in July 2020 include Thoma Bravo’s buyout of the US subsidiary of Majesco Limited for $594 million followed by KKR’s buyout of J B Chemicals and Pharmaceuticals Limited for $496 million.

From the point of view of deal type, buyout deals recorded the highest value of investments at $1.7 billion across six deals (64% decline y-o-y). July 2020 recorded the highest value and number of buyouts in 11 months, which is in line with our earlier forecast of funds using the current opportunity to undertake control transactions at attractive valuations in quality businesses. Growth investments were the second highest at $988 million across 16 deals (26% decline y-o-y) followed by credit investments at $910 million across 12 deals (2.2 times growth y-o-y).

Start-ups recorded $272 million in investments across 40 deals (80% decline y-o-y).

 

From a sector point of view, technology was the top sector in July with $963 million invested across 10 deals followed by financial services with $882 million invested across 15 deals and pharmaceuticals with $699 million invested across three deals. Infrastructure sector that was the top sector in July 2019 with $4.4 billion in investments recorded just two deals worth $15 million in July 2020.

Vivek Soni, Partner and National Leader Private Equity Services, EY said, “July 2020 recorded a rebound in PE/VC investment activity and fund raising. While on a y-o-y basis, deal activity is still muted, in July 2020 at $3.7 billion, it saw an uptick into what has been the best month for PE/VC investments in 2020 (excluding the investments in Jio Platforms). Likewise, PE/VC fundraising also recorded a sharp rebound in 

July 2020 with fundraises worth US$2.2 billion, 38% higher than the total funds raised in 1H2020.

This uptick in PE/VC investments was supported by a pickup in buyout deals which recorded $1.7 billion in PE/VC investments with marquee funds buying controlling stakes in quality businesses at attractive valuations. From a sector perspective, the technology sector led the pack, recording PE/ VC investment deals worth $963 million," he said.

Exit activity continued to remain subdued, with $134 million in exits, primarily comprising of open market exits. There were no pe-backed IPOs and secondary exits in July 2020.