Going the distance: The expanding lifecycles of private equity funds

08 December 2016

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While it is taking longer for managers to deploy capital, the entire lifecycle of private equity funds also appears to be lengthening. Managers are seeing longer fundraising periods, sourcing periods for creating and generating viable deals, and holding periods for investments. This longer lifecycle can also be attributed, in part, to the very competitive market for investors’ dollars.
 
Besides a change in the fundraising period, private equity partners have indicated that the timeline between investment and disposition has increased, taking 6-7+ years for most. Fund terms have followed in this same trend, with liquidated fund lifecycles taking up to 11-12+ years.
 
In order to understand the drivers of these longer lifecycles, and the impact that such a process will have on fundraising, deployment, and returns, Pepper Hamilton commissioned Mergermarket to interview 50 PE partners, directors, and principles from across the United States.
 
Key findings include:
 
  • 58% of those surveyed say that the PE fundraising period for their current fund was longer than the preceding one, with 16% describing it as having increased significantly.
  • More than half (56%) of respondents say that the timeframe from investment to disposition has increased over the past five years, translating to limited partners’ called capital being illiquid for longer and unavailable for general partners engaged in fundraising.
  • 52% of those surveyed expect the timeframe from investment to disposition to remain the same for the next three years, with equal proportions (16%) saying that it will increase and decrease somewhat for them.

PwC Private Equity Trend Report 2017

27 February 2017

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Mergermarket is pleased to provide the Private Equity Trend Report 2017 published by PwC, the 11th annual survey on current developments in German and international private equity (PE) investment.
 
Key findings include:
 
  • Only 37% of respondents say that their firms increased the volume of new investments made in the year, compared with 51% in 2015.
  • At the same time, more firms say they decreased the number of deals they sealed YoY, from 19% in 2015 to 29% in 2016.

A View From Both Sides: How PE firms and sellers can form wise partnerships

01 June 2017

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The private equity industry’s expanding fund timelines indicate that growth targets are increasingly difficult to achieve. To combat this, PE investors must find companies with compatible management teams and identify unsuitable targets as early as possible. Meanwhile, management teams also need to understand whether an investor’s operating style aligns with their internal culture.
 
To understand what PE investors look for in a target’s management team, as well as the qualities that management teams look for in potential investors, Kilberry in conjunction with Mergermarket interviewed both sides of the table for an in-depth analysis.
 
Key findings include:
 
  • PE investors think the quality of management at a target company contributes 31% to the success of a deal, while the company’s operating model/fundamentals contribute 37%, and the product 32%.
  • More than a quarter (28%) of portfolio company executives said their PE investors were too involved in managing the business, and nearly a quarter (24%) of PE investors said the biggest challenge they faced with management teams was their reluctance to cede control of day-to-day management.
  • The greatest number of PE investors (44%) said that external assessments were the most important formal method for evaluating a target company’s management team

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