July 28, 2020

Private Equity: PE Grabs Larger Piece of the Small & Mid-Market Pie

According to this recent Bloomberg Law analysis, the Covid-10 pandemic may be depressing the M&A market, but PE funds aren’t wasting the crisis. Instead, they’re growing their market share in U.S. small & middle-market M&A. Here’s an excerpt:

In the second quarter, we saw historically low M&A deal volume across the board. The same held true for the small and middle market, which had the lowest volume for any quarter in at least five years. Roughly $75 billion dollars in deals involving U.S. targets valued up to $1 billion dollars were announced in the second quarter, compared to $115 billion in the first quarter and $156 billion in the fourth quarter of last year.

If we look at the private equity subset of these small and middle market deals, we see a slightly different story. For PE deals, the second quarter was definitely slow, with lower volume than in prior quarters, but the negative impact on deal volume was not as drastic compared to the rest of the market.
What’s striking is the increase in private equity’s share in this segment: Over recent years, private equity deals have represented about half of all deals. In the second quarter, this percentage market share rose to 62%.

So, while the entire small and middle market pie did shrink last quarter, private equity came away with one of the largest slices of the market it’s had in recent years.

Bloomberg Law says that PE funds grabbed the lion’s share of deals in each the three hottest M&A sectors during the second quarter: consumer non-cyclical (66%), technology (81%), and financial (54%).

John Jenkins