Private Equity Smashes 40-Year Record With $500 Billion of Deals in Six Months

Deal or no deal? How about 6,289 of them?

That’s the number of deals private equity firms announced in an historic first half of 2021. Worth $513 billion, it’s the most deal activity since data firm Refinitiv started keeping tabs back in 1980.

A Trillion Dollars Is No Big Deal

Private equity firms — investment funds that buy, restructure, and sell non-public companies — accounted for 18% of all corporate dealmaking in the first six months of the year, as record-sized sums were thrown around like confetti after the pandemic’s spending freeze:

• Overall corporate dealmaking hit a record $1.5 trillion in volume in the second quarter. That makes four straight quarters above $1 trillion in deals, an almost unfathomable rebound in activity from the stagnation of the pandemic.
• And companies have already struck $2.8 trillion of deals this year, up 129% from the first six months of 2020. Noteworthy among them, WarnerMedia and Discovery joined forces to form a $135 billion streaming giant.

“Some of it is companies reorganizing in response to Covid and some are taking advantage of a sellers’ market,” Alison Harding-Jones, head of EMEA M&A for Citigroup, told the Financial Times. “There may be an element of people thinking, will the environment be this good in six months’ time?”

SPACs Still Here: Plenty of ink has already dried predicting the demise of special purpose acquisition companies after they were hit with regulatory scrutiny. But blank-check firms have hung around, accounting for 10% of M&A activity in Q2 (albeit, down from 18% in the first three months of the year). TPG, the private equity giant with $100 billion in assets under management, is itself weighing a SPAC merger at a $10 billion valuation, The Wall Street Journal reported Wednesday.

End of the PE Party? While deal volume is off the charts, PE firms may not be swimming in dough for long. The Biden administration is set to move forward with plans to nearly double taxes on carried interest — which private equity managers earn from their investments — raising them from 20% to 39.6%.