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VCs move past 'bad blood': Our new research dives into the landscape for blood-based testing and unpacks the key challenges to widespread liquid biopsy adoption. We'll give it a wide release Monday, but you can get early access here.
Leveraging LCD's insights: As the leveraged loan market trends toward uncertainty, our LCD team is hosting a live discussion Wednesday to discuss how investors anticipate future moves. Register here.
Investor views: On Thursday, our analysts will go over key findings from our Sustainable Investment Survey, including the politicization of ESG, impact investing's increasing popularity, and challenges across the ecosystem. Register here. | | | | | |
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| How private equity has adapted to a higher-rate environment | | Higher rates have finally breached the engine room of the PE dealmaking machine—the leveraged buyout.
Until March of this year, the playbook for PE was tried and true: - find an attractive platform company that is best-in-breed in a particular market segment
- find a group of Wall Street banks willing to finance 70% of the purchase price through syndicated loans and high-yield notes
- lock into a cost of funding that floated 450 basis points above a sub-1% overnight lending rate
- then use that platform company to make smaller bolt-on acquisitions that are even easier to finance
This is the playbook that ultimately produced an unprecedented one-year horizon return of 54.9% for global PE for the period ending Q2 2021. Enter the Federal Reserve in March of 2022. Three percentage points of rate hikes later, in what would be the fastest tightening in a six-month span since 1977, the playbook goes out the window. While no one is calling for a repeat of those dark days when short-term rates climbed to nearly 20%, this has been a historic interest rate shift nonetheless— and the impact on the PE world is significant. Floating rates for loans on LBOs averaged 4.8% in February before doubling to 9.8% in September.  | | Click to see a larger version of this chart. |
PE-led deal activity finally felt the bite of higher borrowing rates in Q3. The total value of buyouts declined by 20.4% from Q3 2021. That's on closed deals, many of which were negotiated months ago.
On announced deals, we believe the decline could be twice that, as indicated by Blackstone's Q3 report this past week which pointed to a 45% year-over-year decline in deployed capital.
Even more dramatic is the decline in exits, which are running at 30.1% of year-ago levels. So, how has PE adapted? For one, PE is doing more public-to-private deals. Take-privates are on track for a second consecutive year at $100 billion or more in deal value for the first time since 2006-2007. Not only are these more seasoned companies from a credit standpoint, but they also allow mega PE funds to deploy their mega amounts of dry powder at beaten-up public prices. Second, PE is finding a new source of funding in private debt funds. Four of the last big take-private deals announced in Q3 used private debt. While this source of financing typically maxes out at 50% of the purchase price and not the 70% that traditional bank loans used to cover, that source of funding has dried up as the new-issue leveraged finance market is all but frozen. Lastly, PE firms continue to drive strong top-line growth in portfolio companies. In its Q3 results, EQT estimated that its PE portfolio was still growing revenue at 20% through August. Blackstone indicated 17% revenue growth for its PE companies in Q3. Growth like that goes a long way toward covering higher interest expense. For more data and analysis, click to download our free Q3 US PE Breakdown. | | | | | | | |
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Unwrapping Sustainable Packaging
Millions of tons of new plastic packaging are generated each year in the US alone—much of it ending up in landfills or waterways.
Is there a better way?
Sustainable packaging startups think so.
|  | | Click to access our research on sustainable packaging. | | | |
From bioplastics and seaweed to mycelium and fibers, novel materials and circular economy models are emerging to offer sustainable alternatives to harmful single-use packaging.
Meanwhile, VC investment in the industry has grown steadily over the past decade, peaking at $834 million across 87 deals in 2021.
We unwrap the future of sustainable packaging and why further regulatory action will likely be needed to reduce plastic consumption: | | | | | |
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| | | Click for a big version of our chart on one-year horizon IRRs. | | | | The newest editions of our PitchBook Benchmarks are now live, with full data as of Q1 2022 and preliminary Q2 data in our global edition. The report has dozens of pages of fund performance metrics like IRR quantiles, pooled horizon returns, cash multiples, and PMEs. It features downloadable XLS tables, data visualizations, and PDFs that slice the data by strategy, vintage year, and geography. All of the following breakouts are available for free as we continually work to improve the timeliness and expansiveness of our benchmarks: - Global (includes prelim Q2 data!)
- Venture capital
- Private equity
- Private debt
- North America
- Europe
- Secondaries
- Funds of funds
- Real estate
- Real assets
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We hosted two live discussions this week:
The first covered the future of fintech regulation with a pair of policy analysts. The second offered best practices and tips for cash flow forecasting.
As always, all of the recordings are available for free. View our full archive here.
A few upcoming events: - Nov. 2—We're co-sponsoring the Intelligent Applications Summit 2022 in Seattle. The event will bring together leaders who are building and enabling intelligent applications in the business and life science sectors. To request an invitation, click here for more details.
- Nov. 8—Our latest Venture Monitor webinar, presented in sponsorship with Insperity and J.P. Morgan, will cover the US VC market's current trajectory, key trends to watch, and what to expect in the future. Register here.
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Our insights and data featured in the press: - While this year isn't on track to match 2021's record for corporate VC participation in terms of capital invested—$151.6 billion—2022 has already passed 2020's prior record of $78.1 billion. [TechCrunch+]
- A16z crypto participated in only seven crypto and blockchain VC deals in Q3, a big drop from recent quarters. [Fortune]
- The cost of taking on venture debt is growing heavier. [FT]
- Why Cerberus-backed Albertsons held on unusually long—rather than selling. [Quartz]
If you're a journalist interested in interviewing our analysts or requesting data, contact our PR team. | | | | | |
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Highlights from our other recent research:
Market updates
Thematic research
Emerging Technology Research
Coming next week (subject to change) - Global M&A Report
- European PE Breakdown
- Q3 SPAC Market Update
- Analyzing the VC liquid biopsy landscape (sneak peek!)
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| A message from Streetbeat | | |
| Streetbeat's algo-trading strategy takes flight | | The future of investing is here. Streetbeat—a fintech start-up taking on Wall Street—is bringing the power of data and AI to retail investors. Streetbeat’s proprietary algorithms process 1B+ data points every day to create predictive market signals that drive its auto-investing Flagship strategies.
The results? Streetbeat’s Flagship Stocks Strategy in Q3 alone has taken off, averaging 8% gains vs. -3% in the S&P500.
With 110,000+ clients in just 8 months from launch, Streetbeat is putting the power of Wall Street in consumers’ hands via a simple, powerful trading app.
Click here to learn more about partner and investing opportunities. | | | | | | | |
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| | Since yesterday, the PitchBook Platform added: | | 423 Deals | 1992 People | 569 Companies | 22 Funds | | | | | | |
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