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Setting the investment agenda

22.02.2021

Monthly Agenda February 2021 - Alternatives

Private Equity (PE) deal flow rebounded strongly in Q4 2020 following a sharp decline in activity around the middle of the year. Fourth quarter activity in the US, the world’s largest PE market, is estimated to be a record in terms of both the number of transactions that took place (1,770 deals) and the total value of deals ($267.8 billion). Tech and healthcare continue to be the focus for PE funds with 38% of all deals done in 2020 across the two sectors. With record amounts of dry powder at the disposal of PE fund managers, 2021 could yet be another record year for deal flow activity.

Chart 17: Private equity activity picks up in Q4

 

Enlarge Source: Pitchbook

 

 

Despite the slowdown in total annual deal value for 2020, growth equity was one area that continued to see a strong increase in deal flow, growing by 9% to $62.5 billion in 2020 as PE managers remain bullish on the segment. Often characterised as the middle ground between venture capital and traditional leveraged buyout deals, growth equity has become an increasing focus for PE managers targeting companies that have enjoyed strong organic growth now looking for capital to scale up and achieve the next stage of growth. Silver Lake’s investment in Airbnb is one such example from 2020, investing $1 billion at an $18 billion valuation, the company’s market cap is now greater than $120 billion. 

Chart 18: Growth equity’s continued rise in value

Enlarge Source: Pitchbook

 

 

Copper prices have surged in recent months back toward multiyear highs as optimism of a global economic recovery continues to pick up. With many analysts forecasting the beginning of the next commodity super cycle, demand for copper which is a key material used in many clean energy technologies has risen strongly. Copper supplies shrank to their lowest levels since 2008, exchange tracked supplies stand at a little above 200,000 tonnes compared with annual average demand of 23 million tonnes, less than 1% of 2021 forecast consumption levels.  

Chart 19: Copper stockpiles lowest in over five years

Enlarge Source: Bloomberg

 

 

Darragh Kennelly
Investment Analyst

 

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