PE exits jump to decade high

  • PE-supported deal exits at decade high
  • Report by PitchBook and Deloitte
  • PE buyers like recurring revenue from SaaS

Exit markets remain lukewarm for venture-backed companies, but you’d never know it by looking at last year’s private-equity-backed buyouts.

These PE-supported deals, which often focus on software startups, shot to a decade high, a study from Deloitte and PitchBook shows.

In doing so, their accumulated value nearly doubled in a year to $8.1 billion across North America and Europe, where they accounted for 18.5 percent of venture exits.

The increase is powerful validation that this new avenue to liquidity may be here to stay as portfolio companies take longer to exit and become more mature in the process.

PE buyers have latched onto the recurring-revenue model of SaaS companies because of its predictability.

The study found that deal count rose sharply from 2016, even as overall exit volume for venture-backed companies, including IPOs and M&A, declined for a third year. In 2016, for comparison, PE-backed buyouts accounted for just 13.8 percent of deals, the study found.

The study went on to identify 1,265 exits overall in North America and Europe last year with a value of $67.3 billion. While volume was down, value was up just slightly, indicating average deal size rose.

At the top of the market, big-deal activity continued. Exits exceeding $100 million made up slightly more than a third of deals involving venture-backed companies but accounted for 88.7 percent of total value, the study said.

And for the second year in a row, exits of more than $500 million made up more than half of exit value.

In 2017, acquisitions declined for the third consecutive year, but IPOs increased 30 percent from 2016 to 114 offerings. IPO deal value was up sharply.

One active PE firm in software buyouts has been Providence Equity Partners, with 48 deals since 2015, including last year’s $200 million deal with DoubleVerify.

San Francisco exits. Photo courtesy Joe_Potato/iStock/Getty Images