The biggest players in the UK market – Reed , EMAP , United ( forerunner of UBM ), ITE were all quoted on the London Stock Exchange – and Blenheim floated there in 1991 to generate funds for expansion .
But after around 2000 the financial world began to change . Between 1999 and 2021 the number of companies which were quoted on the London Stock Exchange fell from more than 4,000 to just 2,009 in January 2021 . The New York exchanges all showed similar declines with half their quoted companies disappearing . The total value of all the companies traded on the London Stock Exchange at the end of 2021 was £ 3.9 trillion . That compares with the £ 1.7 trillion in cash alone ( ie not including any businesses which PE owns ) which PE held on that date . In other words , if they borrowed half the cost , the large PE companies could buy all 2,009 companies quoted on the London Stock Exchange – and do it simply with money they already have available .
What about the rest of the financial world – how is that doing ? PE is only part of the broad financial marketplace . In 2021 just over $ 6 trillion was spent on all merger and acquisition deals which were publicly announced ( to reinforce that number – it is $ 6,000,000,000,000 ). PE spent $ 1 trillion of that – so assuming that the PE deals added 50 % debt , then PE ’ s share would be $ 2 trillion . So roughly one third of all acquisitions and other deals in 2021 were made by PE .
The rest are , of course , quoted stock exchange companies buying other companies – the largest deal completed in 2021 was Discovery buying Warner Media for $ 43bn .
Why you can ’ t buy a house in Clapham So who gets rich ? Well , above all others the investment banks who “ advise ” on these deals . They took home $ 157bn in fees on these deals . If you
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Jul-10 Oct-10 Jan-11 Apr-11 Jul-11 Oct-11 Jan-12 Apr-12 want to know why you cannot buy a house in Clapham or afford the private schools in Richmond , then the law firms and accountants who also worm their way into every single acquisition or issue of shares also generate enormous fees for this work on mergers and deals . The accounts of Deloitte , the largest accountancy firm , suggest that it earned $ 6.5bn in fees advising on deals in 2021 . And that is just one firm .
If something can ’ t go up forever , it will stop Which is , of course , the big question . Already in 2022 we have seen a big stock market correction ( broadly 14 % at the time of writing , with firms like Facebook and Netflix falling over 25 %) and interest rates on the rise ( generally asset prices fall when interest rates rise ). So , are the good times coming to an end ? Paul Taubman , of PJT Partners , says not . To quote : “ What ’ s been driving this activity is the incredible
Multiples of profits paid for trade shows 2010 to 2020
Jul-12 Oct-12 Jan-13 Apr-13 Jul-13 Oct-13 Jan-14 Apr-14 Jul-14 Oct-14 Jan-15 Apr-15 Jul-15 Oct-15 Jan-16 Apr-16 Jul-16 Oct-16 Jan-17 Apr-17 transformation we are seeing around the globe . You have this digitalisation trend , which is speeding up , not slowing down . You have the decarbonisation trend , the electrification trend , you have so many macro-trends where companies need to re-position their businesses .” And there is still that wall of money .
So how did private equity take over the world ? Well , not by design .
As the traditional Western nations became richer , there was simply more cash looking for a home . Other countries , particularly China , reinvested the money they got from selling clothing and mountain bikes , back into the US financial markets – generating billions of “ loose ” cash looking for a home . Pension funds , in particular , found themselves searching for ways to generate better returns . More and more money was pouring into pension funds as societies became richer – and , in particular , as the baby
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