Private Equity

During the second quarter of 2021, the private equity industry continued the strong momentum seen over the preceding three quarters. Across a number of metrics, second quarter activity was more robust than that of the first quarter. Second quarter 2021 deal volume was stronger quarter-over-quarter on both a North American and global basis. In North America, transactions totaled $136 billion in the second quarter of 2021, as compared to $105 billion in the first quarter—a quarter-over-quarter increase of 30%. Global deal volume in the second quarter increased approximately 23% quarter-over-quarter to $219 billion. Given this level of activity, yearly deal volume is poised to set a record on both a North American and global basis in 2021.

Dry powder at June 30th stood at an all-time high of $888 billion; this was an increase of less than 1% from March 31st levels, but the quarterly trend of setting all-time records for dry powder continues nevertheless. Also demonstrating strength were the transaction multiples paid. First half 2021 average multiples paid stood at 11.1x, slightly below full year 2020’s all-time record of 11.6x but still high relative to historical levels. Average leverage for buyouts year-to-date was 5.9x multiple of EBITDA, which is in-line with historical levels. Equity contribution as a percentage of total capitalization was at 43%, consistent with the last several years. Finally, in the second quarter of 2021, the number of exits increased approximately 2% quarter-over-quarter, while dollar volume increased 26%, reflecting larger monetizations.

As previously stated, private equity has proven to be a highly resilient asset class. Across many metrics, industry momentum continues. With each passing month, there is greater stability in the financing markets, which helps underpin deal activity and multiples paid for transactions. Additionally, record dry powder levels provide a high floor for deal activity, as those funds need to be deployed. Given the robust financial performance of many portfolio companies, we expect exits will also continue at a healthy pace. Barring unforeseen geopolitical conflict, weaker-than-expected economic performance, or a dramatic and prolonged increase in COVID-19 cases, 2021 should continue to be one of the strongest years for the industry.

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Second quarter 2021 deal volume increased 30% in North America and approximately 23% globally on a quarter-over-quarter basis.

Buyout dry powder at June 30, 2021 stood at $888 billion, an all-time record and a 3% increase from December 31, 2020.

The number of exits increased approximately 2% quarter-over-quarter in the second quarter of 2021, while dollar volume increased 26%, reflecting larger monetizations.

Average LBO multiples in the first half of 2021 stood at 11.1x, which is consistent with the past several years.

Angelo Gordon’s Capital Markets Perspectives

AG Capital Markets Perspectives (“CMP”) provides our portfolio managers’ views on the credit, real estate, and private equity markets. To access this quarter’s CMP and past quarterly reports, please complete the form below.

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