Thread by @marketplunger1

Bain Capital released their 2020 Private Equity Report yesterday.

I read it so you don't have to.

Here's the PDF: bain.com/globalassets/n…

Here's my TL;DR filled with my favorite charts, graphs and statistics ...

cc: @BrentBeshore

1) Buyout deals posted strong year despite declining macroeconomic outlook.

Note:

- GPs continue to make deals

- Exits and capital raises happening at higher and higher levels

2) More PE deals at higher and higher multiples

Note:

- Average EV/EBITDA multiple for LBO reached 11.5x in US

- Less than 40% of deals done at <6x leverage

- True leverage may be higher as banks allow PE firms to leverage based on PROJECTED earnings (not actual earnings)

3) More deals done at higher valuations (cont ...)

Note:

- Deals with EV/EBITDA multiples >6x rose to more than 75% of all deals

- Over 55% of US buyouts had an EV/EBITDA multiple ABOVE 11x

4) PE uncalled capital (I.e., dry powder) has grown since 2012.

Why?

- GPs are looking for places / companies to put capital to work

- Bain estimates dry powder equals 2.6 years of future investment

- "Old capital" constitutes less than 1/5th of PE capital

5) Buyout funds outperform public equities, but spreads are tightening.

Note:

- Over 10-yr horizon, buyouts did NOT produce much premium over public markets

Why? Bain has ideas:

- PE maturing as an industry

- Stocks have had a great run last 10yrs

6) Public markets focus on hardware and consumer software -- PE focuses on other things

Note:

- Hardware / Software make up 63% of capital invested in PUBLIC markets

- 72% of PE capital concentrated in Enterprise Software/IT services

7) Growing trend of PE funds raising money for ESG Investment Initiatives (I can hear the cringe)

Why? Bain has thoughts:

- 60% of investors under 71 believe ALL funds should consider ESG factors when investing

- Millennials are 2x more likely to buy sustainable products

8) Shorter time horizons = narrower spreads between public/private market returns.

Note:

- Outperformance of PE kicks in around 15 years

- Long-term horizon needed in PE investments (obv.)