A Record 2021 for Private Equity

By Generational Equity


A few weeks ago, Bain & Company released its mid-year review of private equity (PE) activity in 2021. What they found is summed up by Bain as follows:

Our midyear report found that the industry continued to SUPERSIZE in 2021 and is on track to post its best year by far.

And we agree with Bain’s analysis. Based on our experience so far in 2021 (we are having a record year – over 40% of our deals have been acquired by PE firms), as well as discussions we have had with PE firms, 2021 will most certainly be a record year for PE investments. Here is more from the Bain report:

At this time last year, when Covid-19 was still casting a long shadow over the global economy, would anybody in the private equity industry have predicted that 2021 had the potential to blow the cover off the record books?

We noted then that the deal market was showing surprising strength as massive government stimulus kept economies and markets humming around the globe. But the pace of recovery has been extraordinary, and, by almost any measure, 2021 is setting up to be by far the best year in the industry’s history.

This is truly remarkable if you think back to mid-year 2020 when COVID was impacting nearly every industry and there were clouds on the horizon. However, that has turned around dramatically, beginning in the latter half of 2020 and has really taken off in 2021. This can be clearly seen in the following chart from Bain:

An image

As I look at the data in this chart, what really impacts me the most is the amount of dry powder in 2021 vs 2011 and the significant portion that is “buyout” capital. Dry powder is the capital committed to PE funds by their limited partners to be used to invest in companies.

PE funds create targeted funds that they then promote to pension funds, family offices, investment funds, high net worth individuals and others. These limited partners commit to a specific amount that will be called upon as the PE firm finds relevant investments. 

Funds usually have a life span of 5-7 years in which the firm must make its investments. That means that the $3.3 TRILLION of committed capital (as of June of this year) will need to be invested most likely by 2026-2028. This means that PE firms will be active for YEARS and will be looking for viable privately held businesses to invest in quite aggressively.

This is how Bain summed up their expectations for the remainder of 2021 and beyond:

Our crystal ball is as fuzzy as everybody else’s, and we don’t purport to know what the next 6 to 12 months will actually deliver. But the winds seem favorable.

The forces that drove the first half’s extraordinary activity – supportive monetary policy, a relatively strong economy, soaring equity markets, and a mountain of dry powder – show no signs of weakening. Unless something changes, the momentum is likely to continue.

This is great news if you are considering exiting your business in the next 12 months or so. But even if your timing is further out, this is a fantastic time to make your business “buyer ready” by implementing tactical and strategy plans that will guide your growth.

Our team with Generational Consulting Group (GCG) has a proven track record of preparing businesses for substantial and sustained growth over the short and long term. Here are some examples of how they have helped business owners prepare to eventually exit:

To participate in the current and expected dramatic growth in PE activity, reach out to Generational Group – your trusted, experienced, and professional M&A advisors – at 972-232-1121, or contact us via our website at contact Generational

And thanks once again to our friends with Bain for providing us with exciting news about PE activity. You can review the entire report here:

Carl Doerksen is the Director of Corporate Development at Generational Equity.

© 2021 Generational Equity, LLC All Rights Reserved