Private equity investments down 91% in Q3

October 1st, 2009, 12:00 pm · 6 Comments · posted by Jan Norman, small-business columnist

Private equity firms cut their investment in U.S. companies by 91% to $6.7 billion in the third quarter, compared to a year earlier, according to PitchBook Equity Data, an independent research firm in New York.

Source: PitchBook Equity Data

The drop continues a year-long decline in which private equity investment activity has been the slowest in seven years, according to Pitchbook.

Still, Pitchbook predicts that the slump is nearing an end because the number of deals is holding steady.

The deals have become smaller, according to PitchBook data. There were 201 financings in the third quarter compared to 214 in the second quarter, but the amount invested was down 45%.

Some details from the PitchBook report:

Distressed companies grew as targets of private equity investors, representing 10% of the deals in the third quarter compared to 2% in the same period of 2008. Year to date, private equity firms have acquired 25 bankrupt companies and recapitalized 26, investing over $4.5 billion.
Smaller transactions and acquiring minority investments of less than $250 million accounted for 87% of the deals so far this year. PitchBook attributes this trend to the lack of debt equity available.
With 17 deals valued at $1.6 billion, the energy sector was hurt the least by the continuing downturn. The money invested was down just 47%.

“As debt markets begin to normalize bigger deals will return, however, many investors are currently focused on distressed investments, and lower and middle-market deals with very moderate levels of debt,” said John Gabbert, CEO and founder of PitchBook. “Firms are also spending a significant amount of time with their current portfolio companies — focusing on reducing expenses, looking for possible strategic acquisitions and repairing over-leveraged balance sheets.”

Click here to see Pitchbook data for the past two years.

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ocobserver says:

October 1, 2009 at 12:17 pm

What a devastating number. Private equity investment is the lifeblood of the corporations. And this number continues to fall. How can they even mention ‘green shoots’ with a straight face? This tells us pretty much everything we need to know. Hunker down, folks. The big wave hasn’t even hit us yet.

marley says:

October 1, 2009 at 12:37 pm

Yep face it we are doomed.

Bill Paxten says:

October 1, 2009 at 4:11 pm

Doomed? I think not. I’m a business owner and this data does not scare me. One just has to work harder, keep customers happy, and make smart financial decisions.

Also, private equity money is not the lifeblood of “corporations”. Private equity firms acquire established and, for the most part, profitable companies. The SBA, in conjuction with banks, is actually the lifeblood of many, but not all companies.

Oscar Villabolis says:

October 1, 2009 at 4:13 pm

Well said Bill– the other poster has clearly never owned a biz….. hang in there!

bobbyc says:

October 1, 2009 at 4:32 pm

And it will continue to DROP, until the government steps in and actually start regulating big companies.

Until them, the stock markets are no safer than Mexican drug cartels!

Glen Naughty says:

October 2, 2009 at 11:50 am

Had Champaign Brunch with Richard Branson @ Mario Bros in Newport Beach. He offered me one cool million 4 A peice of pie butt told him i’m The Six Million Dollar Man. Tried Cavier on Toast 2 grease the palms @ Round Table negotiations cam 2 no avail. Deadlock may require Carnegie negotiation technique..

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