Highlights
- US and European private equity and venture capital fundraising continued at a robust level in H1 2016. Commitments to US venture and European buyout as well as venture funds were particularly strong. In contrast, fundraising decelerated in Asia-Pacific.
- Recovery in leverage finance markets supported a rebound in the US buyout investments in the second quarter. However, H1 2016 volume trailed the 2015 level due to a cautious first quarter characterized by record pricing of buyouts, adverse leveraged finance markets and a spike in overall market volatility. European buyout deal flow was robust in the mid-market. However, uncertainty around the UK’s recent decision to leave the European Union impeded investment volume, particularly in the large-cap segment.
- Fewer US start-ups received funding while invested capital declined as investors stepped back in the first half due to concerns over valuations and liquidity, particularly for some late stage deals. The pace of unicorn emergence slowed down and deal valuations declined. However, invested capital increased sequentially in the second quarter as scattered billion-dollar deals returned. European venture activity was more stable, but a lack of large deals was evident.
- Exit activity improved in the second quarter after a sluggish start as public markets became more receptive to IPOs and pent-up demand for leveraged loans supported a return of dividend recapitalizations. Cash-rich corporations remained a resilient source of liquidity for private equity and venture capital funds.
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