After The Storm: Private equity after COVID-19

05 January 2021

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Mergermarket is pleased to present After the storm: Private equity after COVID-19, published in association with IHS Markit.

As challenges abound for the PE community, our survey of 30 PE executives reveals that most firms are up for the fight. First, PE firms are actively managing downside risk in their portfolio companies – including operational risks associated with COVID-19. Second, a significant proportion of respondents are looking to tap into higher returns by diversifying their asset class exposure. Third, firms are increasingly adopting advanced technologies to acquire a competitive advantage.

Key findings include:

  • 37% of respondents say they will be prioritizing managing downside risk in their portfolio companies over the next 12 months.
  • 57% believe the PE industry should adopt a standardized reporting policy for fund performance to combat instances of fraud and improve transparency.
  • When asked which parts of their businesses have benefited the most from new technologies, the top three answers were regulatory reporting, due diligence and portfolio analysis.

2021 Global Private Equity Outlook

02 December 2020

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Despite the tumultuous events of 2020, the private equity industry has proven that it can roll with the punches, according to 2021 Global Private Equity Outlook, an annual report co-published by Dechert LLP and Mergermarket. This report discusses how the sector fared amid the ongoing global pandemic, economic upset, and geopolitical pressures that marked this year as well as what the future may hold for this robust and creative industry.

The report includes insights from a survey of 100 senior PE executives, including these key findings:

PE Industry Resilience: While the COVID-19 pandemic has caused widespread disruption across the global economy, the effect of the first wave on the private equity industry proved short-lived. After a short, sharp shock going into Q2 and many auction processes knocked off course, the sector rebounded impressively with total buyout activity in Q3 reaching US$148bn, exceeding levels in 2019 by 10%. The industry’s resilience and ability to bounce back so rapidly should be a cause for optimism through the current wave of the pandemic alongside record sums of dry powder.

Private Credit: Private credit continues to grow in popularity, with 35% of firms having increased their use of these loans in the past 3 years, and almost half (49%) now using private credit as much as traditional bank financing in their buyouts. Greater flexibility on financing terms and ease of execution were cited as top benefits of this type of deal financing. U.S. Election While 58% of respondents believed a would-be second term for President Trump combined with Republican congressional control would have the most positive impact on the PE market, a clear electoral result for President Elect Joe Biden also is a relief for dealmakers.

Carve-outs: Carve-out activity looks set to spike, with 60% of respondents forecasting an increase in the number of carve-outs targeted by their firm. With current economic headwinds putting earnings under pressure, 33% of GPs cited corporates’ need to pay down debt as the primary driver of this trend, with 21% pointing to a desire to conserve liquidity. Carve-outs are also a useful strategy for PE houses themselves— with 17% planning on carving out units of portfolio companies.

Getting Creative: The year’s challenging conditions have seen firms get creative across a range of deal types, with many options set to remain popular heading into 2021. 98% of respondents were likely to consider partnerships with strategic buyers, whereas distressed deals were being weighed up by 87% of firms. Structured equity investments also remain attractive, offering GPs flexibility, greater security and limiting downside risk.

Trade: Geopolitical concerns loom large for firms, particularly in Asia-Pacific. A quarter of APAC respondents cited the US-China trade conflict as the single greatest issue for the deal environment over the next 12-18 months, greater even than the COVID-19 pandemic. Beyond the trade war, new foreign investment rules set by countries including India, Japan and Australia look set to add new dimensions to trade considerations in the APAC region. Notwithstanding, Asia-Pacific saw an impressive 13% increase in buyouts compared to 2019.

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Private Equity Trend Report 2020

25 February 2020

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Mergermarket is pleased to present the Private Equity Trend Report 2020 published by PwC, the 14th annual survey on current developments in German and international private equity investment.
 
In 2019 PE has pulled off another fantastic year of dealmaking in Europe. With alternative assets having delivered in both bull and bear markets, it is hardly surprising that investors are continuing to put their faith in them and increasing participation in PE funds. If the PE industry is going to continue to deliver exceptional returns to investors, it will need to continue to adapt and evolve, upskill and find new creative ways to invest in response to the market and all its players may bring. As every year, 250 GPs in Europe shared their view of 2019 and the way ahead. The results are all combined in PwC’s Private Equity Trend Report 2020.
 
Key findings include:
 
  • Strong leap in European PE activity. Ample dry powder generates focus on capital deployment. Total PE activity (including exits) in Europe increased by 16% year on year in terms of volume.
  • Exits lead the fall in deal value. At 945, the number of European target exits remained stable to 2018, still under the values of the 2015–2018 period. The €121bn in exit value is the lowest figure since 2013.
  • Competition running high. 66% of respondents say competition among PE firms increased in 2019. Furthermore, 68% expect competition for investments among PE firms to increase in 2020, including 20% who say they expect it to increase significantly.
  • What economic crisis? While 51% of respondents expect the world economy to experience low growth, and none expect high growth, 74% do not believe the next financial crisis will occur in the short to medium term.
  • Data analytics prevails. 84% of respondents say they will invest in digitalisation over the next year, and 81% of this group are planning to invest in data analytics. Most (95%) of these have used analytics in their own work to identify potential deal opportunities.
  • Germany prime market. The top country in the EU in which to make PE investments is Germany. Almost half (46%) of respondents singled out the country as the top choice for making buyouts.

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Strength in numbers: The Italian private equity market holds firm despite global headwinds

19 December 2019

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Mergermarket and Unquote are pleased to present Strength in numbers: The Italian private equity market holds firm despite global headwinds, published in association with Gatti Pavesi Bianchi. This report provides invaluable insights into Italian private equity over the last year and examines the outlook for 2020.
                 
Highlights from the report include:
 
  • The Italian private equity market has proved resillient in the face of difficult economic conditions. The first three quarters of 2019 have shaped up very well in terms of volume, with total deal numbers marginally higher than those for the same period in 2018: 114 deals by Q3 in 2018 compared to 117 deals this year.
  • Three of the top five private equity deals in the first nine months of 2019 were for family businesses, including Carlyle's €1 billion purchase of the Forgital Group.
  • Industrials and consumer goods once again dominate in terms of volume, but, thanks to megadeals, healthcare is breaking through in the value stakes. For example, the largest buyout of 2019 - Merieux Private Equity’s €1.1 billion takeover of generic pharma player Doc Generici - was in the healthcare space.
  • In terms of Italian M&A activity, deal volume has held up well in 2019, with 444 deals for the first three quarters of the year compared with 480 in the same period last year. However, value has dropped - from €44 billion in Q1-Q3 2018 to €24.9 billion in 2019.

Dental labs primed to make an impression on PE investors, sources say

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As private equity investors continue to seek the next healthcare services market to consolidate, dental laboratory providers may be the next industry to take the crown.

 

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Global Private Equity Outlook 2020

15 October 2019

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Growing concerns about the state of politics in major markets as well as fears over a potential recession are the biggest challenges currently facing the private equity industry. Amid this volatile environment, innovative strategies are becoming commonplace as the industry is being forced to adapt to an overabundance of capital.

In order to understand how the current PE market continues to evolve, global law firm Dechert LLP commissioned Mergermarket to survey 100 senior private equity executives from across the globe for their insights.

Key findings include:

  • Nearly half of respondents (48%) said they plan to diversify their asset class exposure without a doubt over the next 12-24 months, and another third (32%) said they will most likely do so.
  • The top-cited fundraising challenge among respondents was the trend of large LPs concentrating their investment relationships to a smaller number of funds (27%).
  • There are high expectations for carve-outs, with the majority of respondents in our survey anticipating an increase in the number of such deals.

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