Private equity holding periods fall

SOLDPrivate equity firms are floating off companies at a faster rate as the environment for exits becomes stronger.

A study shows that holding periods for private equity firms has fallen for the first time since 2008.

Preqin says holding times for private equity buyout investments had been rising year-on-year since the financial crisis, reaching a record of 5.9 years for companies sold in 2014.

This was nearly two years longer, on average, than companies sold in 2008.

For investments realised so far in 2015, the average holding period has dropped to 5.5 years, marking the first time that the average holding period for buyout deals has dropped since the financial crisis.

Preqin says this is coupled with a strong exit environment which has seen a record number and value of private equity-backed exits in 2014.

These exits that have been studied are not partial exits, but most usually initial public offerings.

Last year there were 1,686 private equity exits valued at a total of $442 billion (€394 billion), the highest number and aggregate value of exits on record.

Christopher Elvin, head of private equity products at Preqin, says: “The average holding period for these deals has in fact been rising steadily ever since the financial crisis, and reached almost six years on average for deals exited in 2014. Yet for companies sold over the first few months of 2015, this average has fallen, which may indicate this trend has turned a corner.”

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