Lessons Learned: An Analysis of Private Equity Deal Performance Through the Global Financial Crisis

May 14th

by Graeme Faulds, Director of Product – eVestment Private Markets

What will be the lasting economic impact of the COVID-19 pandemic on the private markets? 

This is the question on the mind of professionals across the industry. While investors can see the impact of COVID-19 on the public markets in real-time, they are just now starting to see its impact percolate through the private markets. 2Q 2020 valuations will likely be the first clear view of the pandemic’s affect, but even then, the lasting impact will be uncertain.  

To understand what that lasting impact might look like, eVestment analyzed over 3,000 realized private equity deals from the Global Financial Crisis for clues.  

Here are some of our findings:  

In the six years preceding the 2008 crisis, the average size of buyout deals (Figure 1) grew each year, reaching $220 million in 2007. Since 2009, the average deal size of this data set has hovered around $140 million, suggesting that 2007 was certainly a peak year.

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If we overlay the calculated IRR for all deals in each vintage on total invested, it shows that in addition to being a record year for investment, 2007 was also the worst performing year. 

In fact, 2006, 2007, and 2008 were the three worst vintages. 

Although the IRR dipped significantly in 2007 (Figure 2), it was still 11.1%. However, the neutrally weighted IRR, where each deal is assumed to be the same size, was 18.0% suggesting that it was larger deals that dragged down the performance.

The full report explores how private equity deals compared to public markets using different methods of PME and what hold periods and duration can tell us about deal performance.   

Explore the full report

At eVestment Private Markets we have access to vast amounts of qualitative and quantitative data on private markets and in this analysis, we took a look back at how realized private equity deals performed through the last financial crisis to understand what the recovery to this crisis might look like.

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