US fundraising and deal volume sink in Q3

US buyout volume, exit volume and fundraising levels all fell during the third quarter of 2012, though mid-market activity remains on par with 2011 through mid-November.

US private equity activity declined in three key categories during the third quarter of 2012, causing the Private Equity Growth Capital Council’s Private Equity Index to drop 12 percent.

Buyout volume fell 10 percent to $59 billion, the lowest level during the past 11 quarters, while exits shrank by 29 percent to $21 billion, the lowest recorded in the past 10 quarters.

Fundraising during the third quarter also experienced a moderate decrease, falling 11 percent to $35 billion.
The three declines left the PEGCC’s Private Equity Index – which equals 100 when all three metrics are at their 40-quarter moving average – at 91.8 at the end of Q3. While all three fell during the quarter, the combined impact of the modest declines do not represent a significant decrease compared to the past 12 months.

“The Q3 PE Index results are consistent with the past few quarters, which have remained close to the 10-year moving average,” PEGCC Vice President of Research Bronwyn Bailey said in a statement, adding that the $59 billion of buyout volume demonstrated a “consistent pace of investment and the industry’s place as a driving force for economic activity.”

Despite the quarterly declines, US mid-market activity has remained on par with 2011 through mid-November. General partners agreed 71 deals valued between $50 million and $500 million between 1 January and 15 November, worth a combined $12.7 billion, according to Dealogic, compared to 73 deals worth $13.4 billion during the same period last year.

In terms of performance, a study from the PEGCC last month found that buyouts outperformed the S&P 500 for the one, five and 10-year time horizons by 1.8, 3.7 and 7.0 percentage points respectively, according to data from several private equity indices.

“It’s significant because private equity is a long term investment, and we believe that it should be judged on a long term basis, so the 10 year time horizon is a good one,” Bailey told Private Equity International in a previous interview.

The PEGCC was unavailable for comment at press time.