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US private equity activity slows in Q3

U.S. private equity entries slowed year over year in the third quarter, dropping 24% to 1,078 deals announced, according to S&P Global Market Intelligence data.

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Entry deal volume fell during the first three quarters of 2019 to 3,978 deals announced, compared with 4,503 deals announced in the same period of 2018. Add-on activity dropped to 780 deals in the third quarter from 830 in the third quarter of 2018. Combined, there were 1,858 U.S. private equity entries and add-ons announced in the third quarter, down from 2,250 in the third quarter of 2018.

Gross transaction value for U.S. private equity entries, based on available information, reached $143.07 billion for the year at the end of the third quarter, a 19% decrease compared to the same time period in 2018, which saw gross transaction value peak across a five-year period.

Private equity firms have ample dry powder, but identifying sound investment opportunities has been challenging given competition for deals and high valuations in tandem with an expected downturn in the global economy.

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Information technology continues to soar as the most active sector for private equity entries in 2019, with 1,516 entries announced in the first three quarters, a significant step-up in volume from the next most active sector, healthcare, which saw 694 entries announced, according to S&P Global Market Intelligence data. Including add-on deals, total IT investments announced reached 2,129 deals.

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The third quarter saw three $1 billion-plus deals announced in the IT space. U.K.-headquartered private equity firm BC Partners agreed to acquire U.S. cloud, security and digital infrastructure IT business Presidio Inc. in an all-cash deal valued at $2.3 billion, including net debt, according to S&P Global Market Intelligence's calculated value. U.S.-headquartered technology-focused private equity house Silver Lake Partners will make a new $1 billion investment in U.S. communications and telecommunications equipment provider Motorola Solutions Inc.

The entries follow several large IT deals in the first half, including a Hellman & Friedman LLC-led consortium's $11 billion acquisition of cloud-based human capital management services provider The Ultimate Software Group Inc. and Thoma Bravo LLC's $3.7 billion acquisition of cloud-based platform provider Ellie Mae Inc.

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