Today's crowded, expanding private equity market means that buyout multiples continue to climb, making the deployment of capital a persistent challenge for fund managers. According to 2019 Global Private Equity Outlook, a new report by Dechert LLP and Mergermarket, this environment is forcing managers to think creatively by scaling up, using long-term capital, or creating differentiated strategies in order to gain a competitive edge.
The report includes insights from a survey of 100 senior PE executives, including these key findings:
- Bespoke Primary Acquisitions: To combat competition and higher multiples, respondents said they were very likely to make acquisitions based on industry or market differentials, create vertically integrated portfolio companies, or build a portfolio company from scratch with a hand-picked management team.
- Consortium Deals: Club deals, including transactions with significant co-investment commitments from LPs, are becoming more widespread, though challenges remain, such as determining sources of financing and finding the right consortium partners.
- Long-Term Hold Funds: Long-term hold funds continue to grow in popularity as a means to increase returns and improve deal flow.
- Minority Co-investments: Major private equity houses are increasingly turning to minority direct co-investments when direct investments are not possible.
- Partnering with Strategics: A majority of respondents are somewhat or very likely to consider collaborating with strategics.
- Specialization: The vast majority of respondents said that having a specialization or niche had become important to their firm.
- 2019 Outlook: Creative structures will continue in 2019, while U.S. tax reform, technology, tariffs and the heightened scrutiny of foreign buyers in multiple countries will all make their mark.
Please see full publication below for more information.