Private Equity: Harvard Law School Publishes Memo on PE Year in Review, Outlook for 2020
The Harvard Law School Forum on Corporate Governance published a memorandum from Andrew Nussbaum, Karessa Cain, and Steve Cohen of the Wachtell Lipton law firm. Wachtell Lipton is a New York-based corporate law firm that handles mergers and acquisitions, strategic investments, takeovers and takeover defense, shareholder activism, corporate and securities law, and corporate governance. The memo is titled Private Equity—Year in Review and 2020 Outlook.
Harvard Law School: Private Equity Outlook
2019 was a busy year for private equity with deal volumes reaching $400 billion globally by year-end.
The year included many mega deals like Blackstone’s $18.7 billion purchase of the U.S. warehouse portfolio of Singapore-based GLP. That was the largest real estate deal in history. Last year also saw the $14.3 billion sale of communications infrastructure firm Zayo Group to Digital Colony Partners and EQT. We also witnessed the sale of Nestlé’s skincare unit to EQT for $10.1 billion.
Private equity continued to purse more technology deal in 2019, according to the memo. Although traditionally dominated by venture capital firms, technology has become an increasingly more significant part of the private equity landscape. In 2019 tech deals rose to nearly 40% of U.S. PE deals as of August 2019, the second-highest share of deal value since 2010. The amount of dry powder committed to private equity technology buyouts has doubled since 2016. The industry looks to be a more prominent player in technology companies that could transform many sectors of the economy.
Last year also saw the lowest number of exit deals in the last six years. After the WeWork debacle, many investors pulled back entirely from the IPO market. Private equity firms began to look at less conventional means of exiting deals, including making stock M&A deals with publicly traded companies to cash in on portfolio companies.
Finally, the memo says: “We enter 2020 with continued political uncertainty, trade tensions, recessionary fears and volatility in equity and debt markets. Such an environment tends to have a chilling effect on deal activity. However, given the vast amounts of capital that PE firms have to put to work, we expect that financial sponsors will continue to make deals, find exits, raise capital and find creative ways to create value.
You can download a copy of the memo here.
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