diversification

New Mega-Funds May Have Trouble Finding Mega Targets

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February 13, 2014

Private equity firms, especially those that recently closed mega funds, may have difficulty finding good sized deals, according to the latest issue of PIOnline. Although the number of deals made by buyout funds rose in 2013 to near pre-crisis levels, says the report, sizes of the deals were smaller. Citing data from Preqin, the majority of transactions in both 2012 and 2013 were valued at less than USD 100 million. This is far below the estimated USD 500 million or so per transaction that comes with raising multibillion-dollar funds, according to PIOnline. Other data sources suggest that mega deals will be making a comeback.

The report offers several different scenarios about where the larger deals will come from, such as secondaries or shifting down market to mid-market sized transactions, and suggests that PE investors will have to pay attention to strategy and focus in order to compete this year. Elsewhere Black Rock analysts also noted the sellers’ market in the PE sector, concluding that since new fundraising slowing, competition should decrease for deals. And that debt markets will be the key influencer on the pace of dealmaking. It is quite positive on alternatives to aid diversification based on recent analysis of alternative returns (see graphic). (Image Source: Black Rock Currents)

 

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