Deal flow for sub-$1 billion private equity funds accelerated as 2018 began and set an all-time record for any first quarter, according to data analyzed by top U.S. law firm Akerman LLP. Despite this year's decrease experienced by the rest of middle market funds, data found in the second quarterly Akerman PErspectives Report indicate activity surrounding sub-$1 billion funds continued to show positive divergence from larger peers.

Compared to 2017, exit value and volume for sub-$1 billion buyout vehicles for Q1 2018 also were up and stable. Based on Akerman's analysis, these metrics indicate those funds were relatively more active in deploying capital during Q1 2018 than their larger counterparts, while maintaining relatively favorable exit metrics.

"Sub-$1 billion PE funds are poised for another strong year, thereby increasing their lure as compelling investment vehicles among the range of popular alternative asset classes," said Carl Roston, co-chair of Akerman's Corporate Practice Group. "In such a competitive market environment, these funds require effective deal advisors able to act as deft risk managers that can execute upon often accelerated transactions, foster collaboration with management teams and drive efficiencies."

"Our report shows available data for 2018 indicate deal flow for U.S. PE funds in the sub-$1 billion range has so far equaled to a third of all middle market transactions," said Jonathan Awner, co-chair of Akerman's Corporate Practice Group. "With increasing volatility rippling through the markets this year, this data point alone shows the resilience and overall attractiveness of this fund range, a market segment which Akerman lawyers have long served and understand."

Second Edition Highlights

• The subset of the market Akerman analyzed (relative to prior figures) has exhibited considerably more resilience in deal flow and exits in Q1 2018.
• Even by searching for better-priced, smaller companies, Akerman's sample of PE buyers has nonetheless spent a hefty sum; at $14.8 billion in aggregate deal value already, Q1 2018 totals stand at a third of 2017 ones.
• Q1 2018 has seen a slower start to fundraising within Akerman's sample compared to 2017, something to be expected considering typical economic cycles.
• When it comes to first-time fundraising, investors overall did not deploy capital as aggressively in Q1 2018. But the prior two years experienced torrid activity, with 41 first-time funds closed on more than $13 billion, the strongest two-year tally ever.

Access the Akerman report here.