PE Index: Private Equity Activity Remains Steady in Second Quarter

PE Index registers above 10-year moving average as dollar volume and equity investment increases

Washington, DC, August 11, 2011 –Private equity activity continued at a steady pace in the second quarter of 2011, according to the Private Equity Index (PE Index) released today by the Private Equity Growth Capital Council (PEGCC).

As of June 30, 2011, the PE Index remained above its 10-year moving average of 100, registering at 103.8. This is slightly below its revised level in the previous quarter of 104.7. Some key metrics of the private equity industry in the second quarter of 2011 are:

The dollar volume of global private equity-backed mergers and acquisitions (M&A) increased by 28.3% from the previous quarter to $67.5 billion.

  • Equity contributed by sponsors in leveraged buyout deals increased to 37.0%, on average.
  • Global buyout funds raised $27.8 billion, a 7.0% decrease from the previous quarter.
  • Global callable capital reserves (“dry powder”) continued to decline, reaching $391.4 billion as of July 2011.

“The good news is that private equity capital continues to be deployed in an economy starved for investment capital, and there is still plenty of dry powder available,” said Douglas Lowenstein, PEGCC President and CEO. “It is worth noting that while the PEGCC’s PE Index is still above its ten year moving average, it has returned to the level it was at in mid-2004 just before the market took off to its peak in 2007. With signs of renewed economic headwinds impacting the global debt and equity markets, the index may be under some pressure at least through Q3,” Lowenstein concluded.

Designed to provide an accurate snapshot of the state of the private equity market at any given point in time, the PE Index is a composite measure of global private equity activity based on four key factors: total direct investment (including equity contributions to acquisitions and minority stakes, public equity investments, and other corporate financing); buyout transaction volume; fundraising; and the dollar value of private equity exits (portfolio company IPOs or sales to corporations or other investors). The Index measures 100 when all four components are at their ten-year moving average. These four factors were chosen to make up the index because collectively they capture the most fundamental elements of the private equity market.

The Private Equity Index is calculated using data provided by Thomson Reuters, Pitchbook, Preqin and the Council’s members. The Council plans to update the PE Index at the end of each quarter.