A survey of private equity executives released by Eisner LLP on Friday, August 6, suggests that market activity is improving. Sixty percent of the private equity executives surveyed saw an increase in debt financing availability in the first and second quarters of 2010, compared with Q1 2009, and 68% anticipated a further increase for the second half of this year.
The findings, which are contained in The Pulse of Private Equity, are based on survey results from 120 senior private equity fund executives. The report contains data on transaction and deal flow, debt financing, fund activities and level of portfolio company interaction, as well as views on limited partners' concerns.
Other key findings include these:
- l More transactions: 70% of respondents projected more acquisitions for the second half of this year vs. early 2009. Another 60% felt sales and/or dispositions would increase. In addition, 70% of executives expected more bidding activity for acquisitions in the second half. The executives surveyed are anticipating an active but difficult bidding environment.
- l Moderate increase in employment: The responsibilities of employees at private equity firms have shifted because of a move in 2009 from new investment activity toward portfolio performance enhancement. Fund executives are showing moderate upward pressure to hire additional professional staff during the second half of 2010. This is consistent with their projection for more business activity while sustaining current activities with the portfolio companies.
- l More robust due diligence by potential investors: The executives surveyed felt that investors' interest and focus on due diligence, as it relates to the fund manager and to the investments, will continue to rise in the second half of 2010.
"Fund managers might consider benchmarking their activity against what the Survey results reveal and to get ready for more competition where due diligence, valuation and preparation can be differentiators," Peter Cogan partner and co-chair of Eisner's financial services practice, said in the release statement. "They should acquire with eyes wide open, while understanding that adding value to portfolio companies remains a prerequisite. Managers can also continue to deliver transparency to their limited partners."
Michael S. Fischer (email@example.com) is a New York-based financial writer and editor and a frequent contributor to WealthManagerWeb.com.