November 6, 2018

Private Equity: Tough Sledding for Middle Market Fundraising

This Akerman memo reports on the environment for private equity funds under $1 billion in size. While middle market M&A remains robust, this excerpt says that new capital for these smaller funds is getting harder to come by:

While the amount raised during H1 2018 by U.S. sub-$1B funds declined somewhat (and from a record in H1 2017), the number of such funds raised plummeted precipitously (to the lowest number since the financial crisis). Fundraising for the broader market diminished only marginally, leading the number of funds raised during H1 2018 at this smaller end of the market to account for less than 25% of funds raised in the overall market—a proportion not seen since the financial crisis. As was the case with the broader market, the fall-off in the number of funds raised was more dramatic than the fall-off in the aggregate dollars raised, reflecting a trend towards larger funds.

The memo notes that limited partners’ increasing desire to put larger amounts of capital to work efficiently has created some fundraising headwinds for these smaller funds.

John Jenkins