PE Firms Expect Better Opportunities In 2012

Jun 26 2012 | 11:10am ET

Private equity firms sitting on a lot of ‘dry powder’ believe 2012 will be a better year than 2011 for investment opportunities, according to a survey by Rothstein Kass.

A full 77% of the 293 firms polled by the professional services firm said 2012 would bring more attractive investment opportunities—and only one-third thought funds would be compelled to return capital.

That said, over 25% of respondents indicated they did not plan to actively raise capital in 2012, although most (71%) believe the U.S. will avoid a double-dip recession.

“Our latest research suggests that the waiting game involving private equity firms seeking attractively priced growth companies and entrepreneurial businesses in need of capital will likely persist,” said Tom Angell, principal-in-charge of the Rothstein Kass private equity practice, in a statement. “The fundamental issue is that there often remain significant disparities between what buyers are willing to pay and how business owners value the enterprise. As a result, we have also seen the continuation of several trends that had started to emerge even before the credit market upheaval. Specifically, there remains an inordinate amount of dry powder on the sidelines, while firms continued to take on more active roles at portfolio companies as they develop longer-term exit strategies that unlock latent value.”

Most of the firms polled have been around for more than five years (only 33.6% were under five years old). European and Asian private equity firms were more likely to have seen start-up efforts in the last five years.

Of those firms launched in the last five years, 9% have 50% or more women or minority ownership.

Nearly two-thirds of the firms surveyed believe there will be more exit opportunities for portfolio holdings in 2012, but the answers vary by region—70% of U.S. respondents believe this, 67% of Asian and 39% of European.

Over 81% of the firms polled are located in the U.S., with 10.2% in Europe,  4.9% in Asia and 3.6% in Middle East/Africa and South America.



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