Venture Capital Deals Set Record for 5th Straight Year

Growth in private equity fundraising shows no signs of abating.

Venture capital deal making had its fifth consecutive record year in 2018, with 14,889 transactions worth an aggregate $274 billion, easily surpassing the previous high of $192 billion set in 2017, according to data firm Preqin.

While North America accounted for the largest share of that with 5,510 deals worth $113 billion, Greater China was close behind with $107 billion in deal value. Additionally, nine out of the 10 largest deals announced in 2018 were for companies based in Asia, seven of which took place in China alone. This includes the $14 billion funding of Ant Financial Services Group in June, which is the largest venture capital deal ever announced.

This past year also saw the largest venture capital deal made in the US, as electronic cigarette company JUUL Labs Inc. was purchased by tobacco company Altria Group, Inc. for just under $13 billion. Global venture capital exit activity also had a record year, as 1,094 exits were made for a total of $165 billion.

“If 2017 was a year marked by record levels of fundraising, then 2018 was a year marked by record levels of deal making,” Christopher Elvin, Preqin’s head of private equity, said in a release. “With dry powder breaking the $1 trillion barrier in 2017, some feared that there was too much available capital that might overheat the market and deter deal making.”

Elvin said that while the opposite occurred, “some doubt remains” as dry powder has kept climbing to $1.2 trillion, and fund managers and investors both still say that asset pricing is a concern.

“However, strong activity in 2018 may dampen these concerns,” said Elvin, “and 2019 seems poised to see deal activity climb further rather than slackening.”

A new report from Ernst & Young that surveyed 103 private equity CFOs echoes that projection, saying the boom in private equity fundraising shows no signs of abating.

Ernst & Young said that for the past three years, more than half of private equity CFOs surveyed expect to raise new funds to take advantage of the increased allocation for private equity investing. Also for the third straight year, a majority (65%) of the firms that are planning to raise a new fund expect that it will be larger than their last fund.

Tags: , , , ,