PE activity increases
This year’s survey highlights that in
2011 there will be significant pressure to ratchet up investment
activity and arrange the exits of older investments to return cash to
LPs. Over one in four houses are now saying that selling older
investments will be critical to their ability to raise another fund.
Critics of private equity were often quoted as saying it was too focused on the exit and that this could be distracting for a business making long term investment decisions. But for many CEOs the reverse seems to be true, with many now saying that they have been owned too long and that delays to planned sales are holding up growth.
Most private equity managers have confirmed that the multiples of profit they will pay in 2011 are typically up to 10 per cent and in some cases up to 20 per cent more than they were in the recession. This combined with a growing imperative to exit investments should help create more secondary buyouts in 2011. Ultimately though the PE sector needs more entrepreneurs to sell up and corporates to divest. As pricing edges up this should create more vendor confidence to come to market and create the deal flow private equity needs.
Meanwhile the clear trend emerging in late 2010 is that CEOs of private equity businesses have refocused away from cutting costs and instead are repositioning for organic growth and in a significant number of cases for bolt on acquisitions. Despite the challenges faced in the last few years most CEOs remain positive about the value private equity has brought to their business and two thirds of them would consider another buyout.
To read the full survey, please click here.
