Bloomberg News

Private-Equity Fundraising Slows in Third Quarter, Preqin Says

October 03, 2011

Oct. 3 (Bloomberg) -- Private-equity firms closing funds in the third quarter raised 46 percent less than those in the previous quarter, according to researcher Preqin Ltd., as leveraged buyouts decreased and financing became harder.

In the three months ended in September, 97 buyout funds closed after raising $44.8 billion compared with $82.8 billion by 175 funds in the second-quarter, said London-based Preqin, which compiles data on alternative investments. An additional $42.7 billion was raised last quarter by funds that are continuing to take commitments, Preqin said today in an e-mailed statement.

Firms are seeking to raise $706 billion for 1,728 funds globally, according to Preqin, even as economic uncertainty resulting from Europe’s sovereign-debt crisis and volatile stock markets has stunted recent dealmaking. Announced transactions last month dropped to $12.6 billion from $29 billion in August, according to data compiled by Bloomberg. September was also “a particularly slow month for fund raising,” Preqin said, with “just $8.9 billion” raised by closing funds.

North American-focused closing funds raised $22.5 billion last quarter, while those centered on Europe raised $11.3 billion, Preqin said. Closing funds aimed at Asia and other parts of the world gathered $11 billion in the third quarter, Preqin said.

Average Time Closing

Funds that closed last quarter took an average of 17 months to finish securing commitments, compared with 20 months in 2010, Preqin said.

Buyout firms typically use loans secured on the targets they acquire to finance more than half of the purchase price and cash from their own funds for the rest. The firms seek to expand or improve performance at the companies they acquire before selling them within about five years.

Private-equity firms get money from investors including pension plans and endowments with a mandate to invest it within five to six years and return it with a profit after about 10 years. Private-equity firms typically charge an annual management fee equal to 1.5 percent to 2 percent of the fund, and keep 20 percent of profit from investments.

--Editors: Steven Crabill, Josh Friedman

To contact the reporter on this story: Beth Jinks in New York at bjinks1@bloomberg.net

To contact the editor responsible for this story: Christian Baumgaertel at cbaumgaertel@bloomberg.net


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