• 22 Dec 2020
  • Reading time
    7 minutes

20-plus statistics summing up 2020 in private equity

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The private equity (PE) industry has been key for Apperio since our company’s inception. Accordingly, we work hard to stay on top of news, events and trends in the space.

One technique for keeping our ears to the ground is using survey research. This year we fielded a (landmark) survey of our own – and analysed several third-party studies. As we wind down the year 2020, we went back through the data to reflect on a number of key statistics. 

To keep this list easy to read, but also referenceable, we’ve provided a shorthand note of the source underneath each entry, while the complete list of references can be found at the bottom. 

1. Record levels of capital overhang

Some $1.2 trillion in capital was yet to be invested at the end of 2019. This capital “has between 5-7 years to be invested,” according to a report by the Greenwich Capital Group. “This means that in combination with the current market volatility, the overhang has the potential to keep growing. This will set the foundation for a strong M&A run later in 2021 and into 2022.” (Source: Greenwich Capital Group)

2. Limited partners asking more questions

Limited partners (LPs) are asking more questions during due diligence, particularly around operations, according to respondents to a survey by Private Funds CFO. For example, 90% said LPs are asking questions about cybersecurity preparation while 70% said LPs are inquiring about environmental, social and governance (ESG) policies.
(Source: Private Funds CFO)

3. PE expectations for the US economy

More than half (60%) of respondents to a PE survey by Dykema Gossett PLLC said they had a “positive” outlook for the US economy over the next 12 months. Another quarter (23%) were neutral and 17% had a negative outlook. An analysis of similar surveys fielded over time shows that sentiment for the economy is trending up. 
(Source: Dykema Gossett PLLC)  

4. Cautious optimism for deal-making

Eighty-seven percent of PE firms “expect M&A activity involving privately owned businesses to increase” in the next 12 months. Another 72% said their PE firm, or a portfolio company, would be involved in a transaction in the next year. 
(Source: Dykema Gossett PLLC)  

5. Coronavirus is the largest threat to M&A 

While the optimism is refreshing, dealmakers are still wary of the pandemic’s effects. Some 63% cited COVID-19 as the top threat to M&A deals. The virus replaced “trade tensions with China as the greatest threat to M&A” which was the top threat identified in the same survey a year prior. 
(Source: Dykema Gossett PLLC)  

6. The top factors influencing deal flow

A variety of motivations behind the pace of M&A transactions surfaced in the Dykema Gossett survey. Among the top five factors cited were: 

  • 15% said uncertainties around the pandemic 
  • 15% said uncertainties around the economy 
  • 14% said earnings are growing 
  • 13% said “aging business owners seeking to sell”; and 
  • 12% said “improving valuations”.
    (Source: Dykema Gossett PLLC)  

7. Mixed views for pandemic-related M&A disruption

The survey found mixed views on the potential the pandemic has for disrupting deals. While 54% “expect COVID-19 to have at least a somewhat negative impact on M&A” – another 28% say it will have a positive effect. The report suggests the mixed views are a result of “sectors like health care where the impact of the shutdown has created pockets of consolidation”. 
(Source: Dykema Gossett PLLC)  

8. The PPP effects on PE deal-making

Nearly three-quarters (73%) of PE firms said target companies had participated in the Paycheck Protection Program (PPP), a forgivable loan program fielded by the US government in response to the pandemic. Acquiring companies used a variety of techniques to account for outstanding PPP loans. Some of these included:

  • 38% required the buyer to hold the “amount of PPP loan” in escrow “until forgiven” 
  • 32% “reduced the purchase price by the amount of the PPP loan” 
  • 30% required the lender to hold the “amount of PPP loan” in escrow “until forgiven” 
  • 28% “treated [the] forgivable amount as debt” 
  • 19% “required the seller to pay off the PP at closing” 
  • 16% assumed the PPP loan; and 
  • 8% said a deal did not close because of a PPP loan. 
    (Dykema Gossett PLLC)  

9. Strategic priorities for private equity 

While asset growth was the top of mind for PE firms, a case can be made that all the subsequent priorities PE firms identified support that goal. PE firms rank-ordered their goals as follows:

  • 71% said asset growth 
  • 55% said talent management
  • 43% said enhancing back-office processes and technology
  • 31% said cost management; and  
  • 26% said succession planning. 
    (Source: EY)

10. Areas of technology procurement

Enabling technologies are crucial to providing PE firms with the efficiency to manage greater assets. The top areas that were earmarked for investment included:

  • 60% said compliance and regulatory reporting
  • 58% said fund accounting
  • 43% said investor servicing
  • 39% said accounts payable and expenses; and 
  • 34% said data management.
    (Source: EY)

11. Building a technical, productive and diverse workforce

PE firms were seeking three things from their workforce in 2020: technical skills, productivity and diversity. Nearly three quarters (73%) of fund managers said they’ve prioritised employee productivity. In addition, 58% with $2.5 billion or more in assets under management (AUM) set targets for both ethnic and gender diversity. 
(Source: EY)

12. Accelerating digital transformation 

A survey of PE leaders by Mergermarket and PwC found 84% said “they will invest in digitisation over the next year, and 81% of this group are planning to invest in data analytics.” A whopping 95% say they have used analytics to find opportunities for deals. About half (52%) indicated they’ve seen “operational improvements” as a result of their previous digitisation efforts. 
(Source: Mergermarket and PwC)

13. Growing reliance on data and analytics

More than half (56%) of PE firms said they were using “next-generation and analytical tools”. These tools are increasingly being used to source and expedite deals. The growing reliance on analytics was even greater among larger firms (69%) with greater than $15 billion in AUM.
(Source: EY) 

14. Cybersecurity risk grows in PE 

The risks in cybersecurity have grown in tandem with the increased reliance on technology, data and analytics. More than half (61%) say investors are not confident “fund managers have adequate cybersecurity policies and procedures” in place. 
(Source: EY)

15. Average annual legal expenses in private equity

If cost management is a strategic priority for PE firms, then legal expenses represent an area for potential savings. Firms based in the UK spend an average of $8.6 million on legal expenses annually. Their counterparts in the US spend a little more with an average of $10.5 million. 
(Source: Apperio)

16. Cost of legal services in M&A

In the UK, PE firms spend an average of $253,000 on outside legal counsel during the typical merger and acquisition (M&A) transaction. Here again, US PE firms spend more – averaging $353,000 for M&A transactions
(Source: Apperio)

17. Legal costs as a percentage of a fund

Legal expenses expressed as a percentage of a fund come in at 3.9% for UK-based PE firms and 4.7% for those headquartered in the US. 
(Source: Apperio)

18. Number of law firms on a PE panel

Most UK-based PE firms (60%) have between 1-5 law firms on their approved list of outside counsel partners. In the US, PE firms have a slightly larger panel with 6-10 firms. However, in both geographies, 75% of the total amount spent on legal services goes to a smaller list of preferred law firms. 
(Source: Apperio)

19. Pressure to reduce legal costs

The level of scrutiny applied to external legal expenses has grown considerably in recent years. About one in five or 80% of respondents felt growing pressure to tame legal costs. 
(Source: Apperio)

20. Factors influencing scrutiny of legal expenses

Senior legal leaders inside PE firms cited deal flow as an influential factor driving the overall pressure to keep expenses down, but it wasn’t the only concern. A majority (87%) cited increases in other costs along with the introduction of procurement skills (65%) to the PE organisation. 
(Source: Apperio)

Further reading and PE statistics 

Some of these statistics were examined in a new report we recently published. That report can be downloaded here: Seven Strategic Private Equity Business Trends to Watch in 2021.


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Image source: Infographic by Apperio 


Alun Swift

Alun Swift

Head of Marketing and Revenue Operations

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