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Quarter-End Insights

Private Equity Outlook: Carveouts on the Rise as Fundraising Slows

As dealmakers look to innovate their origination process, we anticipate a continued rise in take-privates and corporate divestitures.

  • Dealmakers are increasingly turning to public markets for deal sourcing. In addition to take-private transactions, PE firms are also pursuing sizable carveouts and corporate divestitures. Of the 13 announced deals of $1 billion or more through March 20, nine were either take-privates or some sort of carveout/divestiture.
  • Institutional investors are making a concerted effort to disintermediate PE funds and execute deals directly. PE fundraising saw a sharp slowdown early in 2018 following several years of strong activity.

Amid a prolonged period of elevated pricing, PE dealmakers are exploring innovative ways to source deals and partner with other investors. One of the more interesting announced deals that highlights this new dynamic is Blackstone’s announced $17 billion buyout of Thomson Reuters’ financial and risk business. Public-to-private deals have increased for four consecutive years, and we think that corporate carveouts and divestitures will be the next trend in deal sourcing.