Value of private equity deals doubles to reach $1.1tn in 2021

Private equity deal values doubled last year to reach an all-time high of $1.1 trillion, driven by growth in average deal sizes as investors deployed their dry powder to promising sectors, a report has said.

Buyout deal value surpassed 2020's total of $577 billion and exceeded the previous record of $804bn in 2006, the report by Bain & Company showed.

The number of deals greater than $1bn jumped 57 per cent in 2021 while the average deal size reached $1.1bn, the report added.

"One reason for the sharp increase in deal value last year is the sheer volume of capital in the market. After 10 years of steady growth, dry powder set yet another record in 2021, rising to $3.4 trillion globally, with approximately $1 trillion of that sitting in buyout funds," Bain and Company said.

Flush with extra cash and encouraged by rising stock market valuations, large buyout funds, corporates and financiers embarked on a deal-making spree in 2021, deploying their dry powder in promising segments such as technology and life sciences.

Global M&A volumes topped $5tn for the first time last year, exceeding the previous record of $4.55tn in 2007, figures compiled by Dealogic show. The overall value of M&As jumped 64 per cent to $5.8tn in 2021, according to data released by Refinitiv this year.

The opportunity to deploy large amounts of capital led to "a sudden and sharp increase in public-to-private [P2P] deals, especially in North America and the Asia-Pacific region", the Bain & Company report said.

Take-private transactions soaked up $469bn in funds globally, rising 57 per cent annually, and were largely responsible for 2021’s record value total, it added.

"The last time the market produced such an increase in P2P transactions was in the run-up to the global financial crisis in 2006-07. The key differentiator of today’s P2P deals is their smaller size. Today’s P2P deals are often done by one to two buyers with deep expertise in the sector, versus the consortia of buyers required for the large deals we saw in 2006-07," the report said.

Buyout firms have also seen their share of M&A activity rise to the highest level since 2006. Investors are also increasingly focusing on technology companies with one in three buyouts now involving a technology entity.

Meanwhile, exits also surged last year. Buyout funds divested $957bn in assets globally, more than doubling the amount recorded in 2020, the report said.

Exits using special-purpose acquisition company deals were particularly notable, increasing 325 per cent from the year before and reaching $158bn.

“Given the high prices paid in 2021, there will inevitably be an increase in pressure on deal sponsors to deliver results this year,” said Hugh MacArthur, global head of Bain & Company’s Private Equity practice.

“The chances of success are highest for firms with a long track record in a sector. To drive returns during this high-wired time, it is critical that dealmakers fully understand the microeconomics of the sector, the value creation levers available to pull, and the risks they’re underwriting.”

Living in...

This article is part of a guide on where to live in the UAE. Our reporters will profile some of the country’s most desirable districts, provide an estimate of rental prices and introduce you to some of the residents who call each area home.

The rules of the road keeping cyclists safe

Cyclists must wear a helmet, arm and knee pads

Have a white front-light and a back red-light on their bike

They must place a number plate with reflective light to the back of the bike to alert road-users

Avoid carrying weights that could cause the bike to lose balance

They must cycle on designated lanes and areas and ride safe on pavements to avoid bumping into pedestrians

Brolliology: A History of the Umbrella in Life and Literature
By Marion Rankine
Melville House

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How much of your income do you need to save?

The more you save, the sooner you can retire. Tuan Phan, a board member of SimplyFI.com, says if you save just 5 per cent of your salary, you can expect to work for another 66 years before you are able to retire without too large a drop in income.

In other words, you will not save enough to retire comfortably. If you save 15 per cent, you can forward to another 43 working years. Up that to 40 per cent of your income, and your remaining working life drops to just 22 years. (see table)

Obviously, this is only a rough guide. How much you save will depend on variables, not least your salary and how much you already have in your pension pot. But it shows what you need to do to achieve financial independence.

The specs

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Transmission: seven-speed DSG automatic

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Torque: 370Nm

Price: Dh136,814

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The flights

Etihad, Emirates and Singapore Airlines fly direct from the UAE to Singapore from Dh2,265 return including taxes. The flight takes about 7 hours.

The hotel

Rooms at the M Social Singapore cost from SG $179 (Dh488) per night including taxes.

The tour

Makan Makan Walking group tours costs from SG $90 (Dh245) per person for about three hours. Tailor-made tours can be arranged. For details go to www.woknstroll.com.sg

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On Women's Day

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Tickets start at Dh100 for adults, while children can enter free on the opening day. For more information, visit www.mubadalawtc.com.

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- 66 million years ago: 10km-wide asteroid crashes into the Gulf of Mexico, wiping out over 70 per cent of living species – including the dinosaurs.

- 50,000 years ago: 50m-wide iron meteor crashes in Arizona with the violence of 10 megatonne hydrogen bomb, creating the famous 1.2km-wide Barringer Crater

- 1490: Meteor storm over Shansi Province, north-east China when large stones “fell like rain”, reportedly leading to thousands of deaths.

- 1908: 100-metre meteor from the Taurid Complex explodes near the Tunguska river in Siberia with the force of 1,000 Hiroshima-type bombs, devastating 2,000 square kilometres of forest.

- 1998: Comet Shoemaker-Levy 9 breaks apart and crashes into Jupiter in series of impacts that would have annihilated life on Earth.

-2013: 10,000-tonne meteor burns up over the southern Urals region of Russia, releasing a pressure blast and flash that left over 1600 people injured.

GOLF’S RAHMBO

- 5 wins in 22 months as pro
- Three wins in past 10 starts
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