The exit market skyrocketed in the third quarter, bucking a downward trend for 2019. This was the first quarter of the year to see a value higher than the previous quarter.
All told, sponsors in the second quarter of 2019 closed 134 deals for a value of $48.7 billion, Thomson Reuters data showed. Despite having the fewest number of deals since the first half of 2015, it had the third-highest deal value since that time. Only Q4 2017 and Q4 2018 had higher values.
The numbers are through Sept. 23. Though the number of deals for U.S.-based PE-backed exits won’t likely break its seven-year average, which is 152, deal value is already 76 percent higher than its seven-year average of $27.6 billion.
The strong quarter for M&A exit activity comes on the heels of a six-year low. The total value of 2019’s exit markets now stands at $81.9 billion, just shy of the 2018 year-to-date total of $83.7 billion.
Of Q3’s 134 exits, 39 had disclosed values, one of which made up nearly the entire quarter’s value.
That mega-sale belonged to KKR. Fiserv Inc merged with KKR’s New York-based provider of electronic payment processing services First Data Corp for a value of $38.7 billion. On completion, Fiserv shareholders received 57.5 percent interest in the merged entity while First Data shareholders received 42.5 percent interest.
The second-largest sale was in the healthcare sector. Leonard Green & Partners sold 16 Acute Care Hospitals & Health Facilities of Prospect Medical Holdings Inc to MPT Operating Partnership, a unit of Medical Properties Trust, for $1.8 billion.
Not far behind in third was Clayton, Dubilier & Rice with a $1.4 billion merger of Willis Towers Watson PLC with MG LLC, a provider of digital marketing consulting services.
High technology emerged as the leading sector in Q3 2019, accounting for 15.7 percent of all M&A exits with 20 deals. Industrials was close behind with 18 deals, or 14.2 percent. At third was financials with 15 deals, or 11.8 percent.
Not all smiles for IPOs
Some aspects of the exit market were better than others. IPOs in Q3 2019 fell in both number of deals and value for the first time this year.
Thirteen companies made their debut on U.S. public markets for a combined total of $3.6 billion, down from 16 companies for a total of $6.4 billion that debuted in Q2 2019.
The largest was SmileDirectClub, which sends custom invisible 3D-printed teeth aligners to consumers’ homes. It raised more than $1.3 billion for its IPO. It is backed by Clayton, Dubilier & Rice, Spark Capital and Kleiner Perkins.
As the accompanying “PE-Backed IPO Exits By Quarter” graph shows, the IPO market is erratic, with PE-backed IPOs fluctuating sharply quarter to quarter.