The rise of private equity buyout firms in the technology sector is highlighted in a new report which says 2018 is set to be a record year.
Industry analysts Preqin says that as of this month, there have been 1,079 buyout-backed tech-focused deals announced globally, approaching the record of 1,096 set in 2017, with more than a month left in the year.
This continues the trend the number of buyout-backed deals in tech which has increased year-over-year since 2009, although the value of these deals peaked at $177bn in 2015, driven in part by the $67bn merger of Dell and EMC.
Tech-focused PE funds now hold more than half a trillion dollars in assets under management (March 2018), doubling the AUM of just 5 years ago.
Fund managers focused on tech currently hold a record $190bn in dry powder ready to be deployed, and fundraising in recent years has been consistently strong, with more than $70bn raised in each of the past three years.
“Private equity firms focusing on technology is not a new phenomenon, but it is striking how much the sector has grown in recent years. In the current fundraising environment, it seems unlikely that the flow of capital will slow in the near future, while the consistent year-on-year rise in the number of deals announced shows the sector has momentum,” said Christopher Elvin, Preqin’s head of private equity.
He added that the growth in activity is due in part to the ubiquity of technology, which sees an ever-increasing number of potential investment opportunities available in the sector.
“But it may also speak to a shift in strategy on the part of some firms – we have seen an increase in the number of add-on deals in the tech space, suggesting a growing prevalence of buyand-build strategies as firms compete to provide scale and capture market share,” said Elvin.
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