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Fear is powerful motivator. Lately, anxiety over tariffs and general global disarray has discouraged would-be buyers of companies from taking the plunge. But for some, the fear of not doing a deal can be worse.
Amid President Trump’s capricious trade policy, the number of deals signed globally in April fell to the lowest in at least 20 years, according to Dealogic data. Bankers the world over are bemoaning the withering of their carefully-tended M&A pipelines.
Yet one group ploughed ahead: private equity. In the US, leveraged buyouts led by these well-upholstered firms totalled $46bn last month. That’s a 25 per cent increase compared with April last year and almost twice the three-year monthly average.
It is helpful that the sectors private equity likes, such as tech and healthcare, are relatively shielded from trade tensions. Some of April’s largest transactions were in this space, from Thoma Bravo’s $10.5bn acquisition of Boeing’s software business to Silver Lake’s purchase of a majority stake in Intel’s Altera for $4.5bn.
The other reason for private equity’s undiminished appetite is that it is sitting on a lot of cash. Globally, dry powder — capital which has been raised to fund deals but has not yet found a home — was $1.2tn at the end of 2024, according to Bain & Co. Of this, almost a quarter has been sitting around for at least four years. Given the average lifespan of a private equity fund is about a decade, and investments are typically held for five to seven years, use-it-or-lose-it time is rapidly approaching.
With a lot of cash to throw around, private equity buyers not only went ahead with planned deals. They paid full prices, too. At Boeing, proceeds from the software disposal were well ahead of the $6-$7bn that Barclays analysts were expecting. The majority stake in Altera went for 5.7 times trailing revenue — about 2.5 times what Intel itself trades on.
Of course, wanting to do deals during market ructions and pulling them off are two quite different things. And it does seem that some financing sources — such as the high-yield bond market — were temporarily frozen amid the uncertainty.
But banks didn’t completely shut up shop. And private credit funds marched on unfazed. Apollo and Blackstone led Thoma Bravo’s $4bn financing. In Europe, in an admittedly thin market, private credit provided financing to twice as many LBOs as the broadly syndicated market did in April, according to PitchBook LCD data.
There is one itch this does not scratch. Private equity firms also seek a way out of the assets they already own. And it doesn’t add up to anything like the deal flow that investment bankers were hoping for. But it does suggest that in the perpetual tug of war between greed and fear, the fear of losing out may prevail.