3 minute read 20 Jul 2021
Closeup shot of a doctor taking a patients pulse

PE Pulse: Five takeaways from 2Q 2021

By Pete Witte

EY Global Private Equity Lead Analyst

Helping clients and stakeholders understand the trajectory and impact of vital trends. Developing thought leadership and insightful content. Aspiring platform tennis pro.

3 minute read 20 Jul 2021
Related topics Private equity IPO

Record-breaking activity as well as megadeals and club deals are top of mind for PE investors right now.

In brief
  • Fundraising, deal activity and exits have never been higher, driven by increasing certainty, continued low interest rates and dry powder accumulation.
  • Megadeals and club deals are reinvigorating collaborations between PE firms.

The post-pandemic rebound in private equity (PE) continues to pick up speed, with historic highs in fundraising, deal activity and exits. Dry powder stores and soaring valuations continue to inspire innovation as the industry roars back from a challenging 2020.

1. PE activity breaks records in the first half of 2021

The resilience of private equity (PE) was on full display in the first half of 2021. After weathering marked declines in deal volumes, fundraising and exits in 2020, firms more than compensated with record levels of fundraising, deal activity and exits. Recovering macro conditions and the widespread availability of financing will provide strong tailwinds for PE as it enters the second half of 2021.

2. Megadeals have returned

PE activity has historically been benchmarked against the “high-water mark” of 2006–07, when PE firms collectively announced more than US$750b in deals globally per year. 1H21 has seen PE firms announce US$580b in new deals, a record for a six-month period, therefore putting the industry on track for its first trillion-dollar year ever. This amount was almost three times what firms announced in the 1H20, and represented a 53% increase over 2H20. Activity increased across the globe:

  • US: 1H21 is up 45% versus 2H20 and up 295% versus 1H20.
  • EMEA: 1H21 is up 92% versus 2H20 and up 130% versus 1H20.
  • APAC: 1H21 is up 52% versus 2H20 (excluding a large outlier) and up 96% versus 1H20.
Three key drivers of current deal activity include:
  1. Increasing certainty due to the pandemic waning in many regions
  2. Continued low interest rates and the widespread availability of financing
  3. The accumulation of dry powder, which according to Pitchbook, amounts to US$1.3t

Sponsors are also announcing larger deals: June saw the announcement of the second-largest buyout in history when a consortium led by Blackstone, The Carlyle Group and Hellman & Friedman acquired Illinois-based Medline Industries for US$34b. 1H21 saw seven such “megadeals” valued at US$10b or more—the most ever over a six-month period.

As a result of increased focused on deployment, PE is accounting for a larger share of global M&A activity. During the great financial crisis (GFC), PE accounted for about 23% of global M&A activity (including buyside and sellside) whereas in 2021, it accounts for 29% of global M&A activity and one-third of US M&A activity.

3. Club deals help drive activity

The return of club deal structures is starting to differentiate the current environment. After the GFC, PE entered a period in which firms largely stepped away from megadeals and looked to investors for additional capital rather than teaming with other PE firms. Limited partners (LPs), including pension funds, soverign wealth funds (SWFs) and family offices in particular, have become an important source of capital for larger deals. That being said, a new era of large-scale deals is reinvigorating collaborations between PE firms, with US$140b in club deals announced in 1H21, the most since 2007. This speaks to the fact that the pool of PE firms that can both write a US$2b equity check for one deal and provide the operational resources needed to support that company is limited and well-defined.

4. Exit activity is at a record pace

Exit activity has climbed substantially and PE firms are exiting companies at a record pace: the wait is clearly over for firms that were prevented from monetizing assets in 1H20 due to lockdowns. Sales have been strong across all deal types, with trade sales, sales to other PE firms, and IPOs back in earnest.

Trade sales, which comprised more than half of exit activity in 1H21, rose by more than 4x compared with 1H20. During this period, IPO listings of PE-backed assets witnessed a similar growth trajectory while exits through asset sale to other PE firms almost doubled by value. Technology and health emerged as dominant sectors and continue to see a surge in exit activity.

SPACs remain an important dynamic for PE, particularly when it comes to exits. While issuance has declined dramatically over the last several weeks, SPACs will continue to be a conversation topic in PE, particularly in regards to exits. According to SPAC Research, with approximately US$180b in dry powder (which translates to deals in the US$700–US$800b range), a significant portion of that capital is flowing toward PE-backed assets. In 1H21, 16% of PE exits by value were acquired by SPACs, a continuing trend that provides a strong tailwind for continued elevated exit activity.

5. Fundraising returns

While exit activity and acquisitions began to increase in 2H20, fundraising saw limited activity through 1Q21, with commitments on funds closed down modestly YOY. This reflects a pivot in firms’ focus in 2020, when the COVID-19 pandemic demanded demanded their attention be focused on supporting portfolio companies and seeking new deployment opportunities.

This has changed: already in 1H21, 500 funds have closed on commitments valued at US$366b. With PE class riding a post-pandemic rebound in economic growth across key global markets, a solid pipeline for the remainder of 2021, and with incumbents adapting to remote functioning, 2021 may become a landmark year for the asset class.

A significant portion of activity was driven by “megafunds.” So far in 2021, funds over US$5b raised more than twice the capital they did a year ago. 2Q21 in particular saw a number of flagship funds close, many of which are valued upward of US$10b. What is perhaps most interesting is that even at that scale, many of these funds closed quickly, are larger than predecessor funds, and in some cases are significantly oversubscribed.

While 72% of capital raised YTD has been by diversified funds, 14% of capital has a mandate to be deployed in the technology sector, followed by mandates for consumer (7%) and health (5%). Health-focused growth fundraising in particular increased by over 50% in 1H21. 


As the industry focuses on deploying record stores of dry powder, 2021 could prove to be a landmark year for the asset class.

About this article

By Pete Witte

EY Global Private Equity Lead Analyst

Helping clients and stakeholders understand the trajectory and impact of vital trends. Developing thought leadership and insightful content. Aspiring platform tennis pro.

Related topics Private equity IPO