The growing size of PE-backed exits became a ubiquitous storyline in 2021, but current market volatility could force the trend to falter.
US mega-exits activity, which refers to transactions of $1 billion or more, had an unprecedented year, with 75 PE-backed companies listed at valuations above the $1 billion mark—a record far beyond previous annual numbers. The median size of PE-backed public listings hit $1.8 billion by the end of 2021, according to our recent analyst note on mega-deals and exit activity.
PE firms seized on unusually high valuations to list their portfolio companies, and as public multiples rose—thanks to government stimulus measures and solid corporate earnings amid the pandemic recovery—mega-sized IPOs boomed.
IT was among the most prolific sectors in 2021, accounting for 39% of the total value of PE-backed public listings worth more than $1 billion. In its public listings, the IT sector posted an aggregate $99.5 billion enterprise value, which was more than triple that of IT mega-listings in 2020.
Numerous subsectors in IT were notably successful in these giant IPOs, including data management, software, fintech and mobile gaming.
Healthcare also saw a jump in mega-listings, as public investors increasingly became interested in innovative industry areas such as healthtech, patient engagement, home care and urgent care.
While 2021 was a breeding ground for mega-exits, it’s likely the trend will lose some steam in 2022.
Market conditions have been volatile so far this year, driven by additional rate hikes, slowing growth from continued supply chain issues, inflation and geopolitical tensions. As a result, many investors could be less willing to publicly list their companies, and those that do could have to grapple with lower valuations as stock prices take a hit.
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This article originally appeared on PitchBook News
Market volatility could reshape 2021's wave of PE mega-exits
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