Private Equity Consolidation

Managers Predict Private Equity Industry Consolidation

A new survey found that the majority of buyout managers are expecting a consolidation within the industry as fundraising troubles persist, the economy is still struggling, and looming regulation. Expectations for mid-market buyouts are much more optimistic on the other hand, as three quarters of surveyed managers said they would do more mid-market deals as financing is more available for smaller deals. One of the biggest concerns for managers is the cost of debt financing for deals which has forced a decline in buyouts and managers fear that banks will not loosen credit for some time.

More than four fifths of managers working in private equity expect a wave of closures or mergers within the industry because the poor fundraising environment will last longer than previously expected, according to a survey of senior buyout practitioners.

The poll, conducted by Private Equity News, found that difficulty in raising funds, coupled with fears about the health of the economy and increased regulation, would continue to haunt the sector, with larger buyouts in particular likely to face a challenging year.

Only one quarter or those who took part in the survey said they expected the average cost of debt financing to be lower this year, compared with 2009.

Of the 500 people and firms surveyed, three quarters of those who expected consolidation said it would come from firms closing because they would be unable to raise funds, while a quarter expected consolidation through mergers or acquisitions. Source

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