Private Equity Behind Record Buyouts and Delistings

The stars have aligned for private equity (PE) and companies looking for buyers as PE firms spent record amounts on buyouts in the first half of 2022.

PE's transactions are up 39% from last year – a record-breaking $226.5 billion – according to financial marketing platform Dealogic. This number includes several blockbuster deals, such as Blackstone's $12.8 billion acquisition of American Campus Communities Inc., a real estate income trust. Another enormous transaction was Vista Equity Partner's $16.5 billion deal with Elliott Management to purchase technology company Citrix Systems.

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Delistings such as these are rapidly increasing in the U.S. and worldwide. Delisting transactions are up $40.7 billion from last year in Europe, excluding the United Kingdom, in which delistings fell 29%. In Japan, deals grew 32% to $6.2 billion. However, delistings in Asia decreased rapidly, tumbling from $4.5 billion last year to $822 million now.

Incentives are clear on both sides as to why PE is stepping in and buying out so many companies. In an unstable economy, public companies find themselves trading at a lower cost than their underlying asset values. Labor shortages, rising wages, inflation, supply chain issues, and more are all making it hard for companies to thrive. And companies tend to delist when they feel that the public cannot meet their financial needs. With recession fears looming and stock markets falling, a window has been created for PE to come in and shed some unspent capital, says John Anderson, Mergers and Acquisition Partner at King & Spalding LLP.

"If you're a company director facing an offer from a sponsor that's delivering meaningful premium to your current price," Anderson told Reuters. "It's a question of taking that bird in hand versus trying to guess when the stock market would bounce back to historical levels."