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U.S. private-equity exits are at their lowest level in more than a decade

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Years of steady growth in the private equity industry continued to reverse this year as persistently high interest rates, inflation and the threat of a U.S. government shutdown dampened dealmaking and exit activity.
Amid this downward pressure, U.S. private equity deals in the third quarter continued several trends seen in the first half of the year, according to research from PitchBook Data.
The leveraged loan market, which typically fuels larger acquisitions by private equity firms, almost ground to a halt around the beginning of the year. But recently the market has shown signs of life, said Tim Clarke, chief private equity analyst at PitchBook. He cited the $11.7 billion leveraged buyout of Worldpay by Chicago-based private equity firm GTCR and the sale of debt related to Apollo Global Management's more than $7 billion acquisition of Tenneco in the just-ended quarter. The deal to sell the debt has been on hold since last year.
U.S. private equity exits have fallen to one of the lowest levels in more than a decade
According to PitchBook, the value of exit deals in the United States in the third quarter fell to the second-lowest level since the same period in 2010, with the exception of the second quarter of 2020, when the coronavirus pandemic was at its peak.
"It felt like a big fall," Clarke said. He pointed out that exit values had risen from the first quarter to the second quarter of this year, but the rise was reversed in the third quarter and remained well below the pre-pandemic average. Overall, Clarke said, exit values in the third quarter fell nearly 41 percent from the second quarter to $44.1 billion, more than 80 percent below the peak hit in the second quarter of 2021.
Total U.S. exits fell about 46 percent in the third quarter from a year earlier, and the space showed some signs of life in the second quarter when Thoma Bravo announced the sale of Adenza to Nasdaq. Vista Equity Partners sold Apptio to International Business Machines (IBM).
In addition, EQT AB-backed Kodiak Gas Services and Ares Management's Savers Value Village also conducted initial public offerings (ipos) in the second quarter. In July, L Catterton's beauty retailer Oddity Tech went public, generating a windfall for the company.
U.S. entry transactions also fell
Private equity deals in the United States fell in the just-ended third quarter, with the value of deals falling about 18 percent from the previous quarter. The total value of U.S. private equity deals is down nearly 55 percent from the peak reached in the fourth quarter of 2021.
The value of larger so-called platform deals in the United States fell 21 percent from the second quarter. These larger deals typically rely on borrowings from buyers, and the leveraged loan market they often turn to has been sluggish.
As the value of private entry and exit deals has decreased, the gap between the two has narrowed by $104.2 million since the beginning of the year, according to PitchBook. But the gap remains wide, totaling $475.1 million as of the end of September.
PitchBook says this huge imbalance could disrupt the industry. It also highlights the need for private equity firms to find ways to provide liquidity to fund investors as capital pools approach their scheduled termination dates.
Clarke said the growing demand for liquidity options could fuel an explosion in continuation funds, which offer investors in the fund opportunities to cash out and also make secondary sales. Energy technology-focused GEC, for example, closed a continuation fund in the third quarter, allowing it to extend its ownership of Estis Compression while also offering investors an exit opportunity. Estis Compression is a provider of high pressure artificial lift services to oil and gas companies.
Growth equity deals dominated, while leveraged buyout deals held steady
Growth equity investments, which are easier to negotiate in the current market, continue to make up a larger share of overall deals, with the annual number of deals on track to surpass the number of leveraged buyouts for the first time in more than a decade, according to PitchBook.
Growth equity deals accounted for nearly 21% of all private equity deals in the U.S. in the third quarter ended Sept. 30, roughly unchanged from the second quarter but up from 17% a year earlier.
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