The Pulse of Private Equity: How useful is aggregate PE data?

Data drives the finance industry. Private equity is no exception – once the calendar flips to January 1, we tally the industry’s annual total and compare it to prior years, under the guise that we can decipher where the industry is and where it’s going using headline numbers. Problem is, at least in private equity, comparing yearly totals isn’t really apples-to-apples, especially if your comparison goes back far enough.

We took a look at two individual years, 2006 and 2014, which had roughly comparable U.S. headline totals but wildly different looks once the data was broken down. The small difference in total value (+5%) compared to the rest of the differences suggests that headline numbers have become almost useless for assessing the industry. The devil is in the details.

Quite a few numbers pop out. By count, add-ons outpaced overall deal flow by almost 3x while also gaining nineteen percentage points when looking at the add-on/platform buyout ratio. Minority deal flow grew twice as quickly as overall PE counts and accounted for a higher percentage of overall deal flow, as well. Platform buyouts, meanwhile, were way down from 2006 levels, by both count and proportion to overall activity. At the same time, more of the platform buyouts that are being done are through sponsor-to-sponsor sales, which were 60% higher by volume in 2014 versus 2006.

The smallest percentage difference was for the median debt component for buyout deals, down to 60% last year from 62% in 2006. Some things don’t change.