Private equity deals are showing signs of an end-of-year flourish

In the last week there have been five private equity deals announced that have been greater than $500m, with three of these five deals breaking the magic $1bn value. The last time three deals greater than one billion US$ happened in the same week was back in the first week of September in 2007 – so pre “BC” (banking crisis!)

What’s more, two of the deals involved the Carlyle Group: one is their $3.9bn IBO of CommScope Inc and the second is the $2.6bn IBO of Syniverse Holdings Inc. The question that we have to ask ourselves is why is it that when the broader levels of M&A activity are still very low – compared not just with pre BC years but with post BC years as well – the PE firms are suddenly back on radar screens and are starting to be significantly more active than before.

It’s not just unique to a couple of major players either, looking at the deal numbers on Zephyr, October saw over $29bn worth of announced PE backed deals, the highest monthly level since June 2008. So this renewed vigor to invest is being seen across the industry as a whole with a number of the high profile PE firms such as CVC, Blackstone, KKR and TPG, amongst others, all tentatively putting their toes back into the market this year.

So why are we seeing this increase in activity? Well, according to Preqin, between 2007 and the end of 2009 $1,546bn worth of funds were raised, and given the complete tail off of the market from mid 2008 until earlier this year, the figure raised represents an awful lot of money sitting waiting to be invested.

Whilst the industry as a whole has had its detractors, until the bankers kindly took that mantle in 2008, the one thing that the PE industry cannot be accused of is being afraid to take risks. So whilst many corporate CEOs are still nervous about doing deals, especially given the ongoing economic uncertainty, this is not an accusation that can be leveled at PE firms.

Maybe, just maybe, this might be the stimulus the global M&A market needs.