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From Brexit to India, Strong Pace of Global Private Equity Growth Continues

The Brexit deadline nears. Global trade is declining. Yet global private equity growth continues on pace.The Brexit deadline nears. Global trade is declining. Yet global private equity growth continues on pace.

Just yesterday, British Prime Minister Boris Johnson again tried a “last-ditch” effort to find a smooth compromise with he European Union (and internal UK players) around Brexit. Again, his plan appeared to lack support.

As the Wall Street Journal reports, “Mr. Johnson’s proposals, formally submitted to the EU in a legal text on Wednesday, seek to address a dilemma at the center of a Brexit riddle…: how to maintain an unobstructed land border after Brexit between Northern Ireland, which is in the U.K., and Ireland, which will remain an EU member state. Those arrangements to prevent the need for customs checks were known as the Irish backstop.” However, European Commission President Jean-Claude Juncker said “’there are still some problematic points that will need further work in the coming days,’ including the prime minister’s customs ideas.”

On the global trade front, “the World Trade Organization slashed its forecast for trade growth for this year and next,” reports the New York Times. “World trade in merchandise is now expected to expand by only 1.2 percent during 2019, in what would be the weakest year since 2009, when it plunged by nearly 13 percent in the midst of the worst global financial crisis since the Great Depression. Only six months ago, the organization was forecasting more than double that pace of growth, a 2.6 percent expansion in merchandise trade.”

Global Private Equity Growth

Despite these and other economic challenges — such as global recession concerns — the pace of global private equity growth continues.

For example, Private Equity Wire reports: “Despite political and economic uncertainty created by Brexit, the UK has improved its already attractive risk-return profile for private equity investors, according to the latest annual Global Private Equity Performance Series from eFront.”

The piece further reports on growth in Asia, as well as other European countries like France and Spain: “According to eFront’s Global Private Equity Performance Series, Benelux, China, the Nordics and the UK continue to be the private equity markets with the most attractive risk-return profiles. However, over the past year France and Spain’s LBO markets saw significant improvements in performance as they converged with their mature Western European peers. This helped bump up risk-return trendlines and average global performance for LBOs.”

One cautionary note: Private Equity News warns that “Private equity firms buy less but spend more on UK deals.”

The piece states: “The number of deals in the UK has fallen to 274 in the 12 months to September, down from 311 a year earlier, according to a report from law firm Mayer Brown.” However, it adds: “Although the number of deals has declined, the value of private-equity backed acquisitions in the UK rose 37% to more than £30bn in the year to September, driven by a number of large investments by US funds.”

Other Examples of Global Private Equity Growth: Ireland, Australia, India

Indeed, thanks to tech sector growth, strong results are also reported in Ireland.

The Irish Times states: “Irish private-equity buyouts are on track to reach one of the highest annual figures on record, while tech deals continue to account for the lion’s share of mergers and acquisitions (M&A) deals locally, according to new data compiled by Mergermarket.”

The piece continues: “The figures, which have been published ahead of an event to be held by the research company in Dublin on Thursday, shows the volume of such buyouts is at its second highest to date, with 21 deals worth €1.9 billion. In addition, private-equity buyouts have accounted for 19.8 per cent of all M&A deals so far this year, the highest percentage recorded since the financial crisis.”

Further news was made Down Under last month, when Wendy Norris, deputy chief investment officer of Australia’s $200 billion sovereign wealth fund, The Future Fund, indicated that “private equity investments were an increasingly important part of portfolio construction in an age of ‘growing private markets on the one hand and shrinking public markets on the other,'” according to The Sydney Morning Herald.

The piece adds: “Ms Norris told the conference crowd that the the Future Fund has $25 billion in private equity investment at June 30, 2019 and 16 per cent of its total investments were placed in this asset class.”

The pace also continued in India — growing 59 percent in August, according to Grant Thornton — with particular strength in the Infrastructure sector.

The Times of India reports: “Private equity investments in India stood at USD 2.11 billion in August, a sharp increase of 59 per cent from the year-ago month, primarily driven by large-ticket transactions, despite the economic uncertainties surrounding the global economy, according to a Grant Thornton report.”