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Private equity ‘overhang’ tops $1 trillion

Mar 05, 2014
Dry Powder Mountain?

FORTUNE -- Private equity firms were sitting on more than $1 trillion in available capital at the end of 2013, according to a new report from Bain & Company.

Not only is this an increase from year-end 2012 ($941 billion), but also is the largest "dry powder" figure in the history of Bain & Company's private equity reports. The specific 2013 number was $1.077 trillion, topping $1.056 trillion from 2008.

One major result of this glut, Bain & Co. argues, will be increased deal-making and rising valuations. Or, put another way, the capital tail will wag the deal dog.

Some other interesting findings from the report:

  • Around $427 billion of the 2013 capital is specifically allocated to buyout investments, with 80% of that money being raised since 2011.
  • Bain & Co. estimates that private equity firms own just 5% of all U.S. businesses with annual revenue of $10 million or more.
  • There were 228 U.S.-based buyouts valued at more than $1 billion between 2009 and 2013. Limited partner co-invest represented around 20% of the total value in those deals. Bain & Co. expects the LP co-investment trend to accelerate, and effectively add to the capital overhang.
  • Average debt-to-EBITDA multiples hit 5.3x for U.S. buyouts last year (6-year high) and 4.7x for European buyouts (5-year high).

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