Take-private deals worth more than $1bn set to increase in 2019

Private equity buyouts of public companies over $1bn could increase next year as firms fight to find value.

Take-private deals are likely to be much larger than other buyouts generally, with figures from Pitchbook showing that the median size this year was $977m, compared to the average non-take-private deal size of $175m.

A third of public-to-private deals were worth at least $1bn this year and more mega-deals are expected in 2019, according to Pitchbook’s 2019 Private Equity Outlook.

Analyst Wylie Fernyhough said: “We expect take-privates, including carve outs from public companies, to increase in prominence…as more mega-deals are occurring, the number of take-privates above $1bn will rise.”

Dechert partner and private equity lawyer Robert Darwin said there are some trends that give credibility to the theory that take-privates could increase and get bigger in 2019.

He said: “Private equity has more money to spend than probably ever before, they have got a bunch of money and they aren’t supposed to be like banks and hold on to it, so they are compelled to do things with that money, and the things they do are likely to be bigger given their financial firepower.

“Some of the biggest deals are inevitably going to include public companies, and this is more likely given the historic valuation premiums for listed companies is declining.

"I’m not suggesting private equity was ever easy, but competition is increasing and it is definitely getting harder to find value.

“Often it can be harder to execute a take-private deal than a private deal, but when you’re on the hunt for alpha, it can be a good option."