With record levels of dry powder sitting in private equity (PE) firms’ accounts at the end of 2013, and a large percentage of this urgently requiring investment or returning to investors, it was expected that Q1 2014 would be a bumper period in the PE industry.
While some PE firms have been busy doing deals, the industry as a whole has been tepid, with total deal value sinking 11% year-on-year, to $82billion, says the Financial Times. Consequently, the value of dry powder has also increased, with Bain & Co reporting in March that this figure has surpassed $1trillion for the first time in history.
Although this year the market is going against some big deals in Q1 2013, including those involving Dell and Heinz, the level of performance is still disappointing.Harry Hampson of JPMorgan told the FT, “Even though a lot of private equity groups are focused on putting money to work, there’s been fewer primary deals than people had hoped for. That said, corporates are doing more acquisitions that will likely in turn lead to disposals and that should present opportunities for buyout funds.”
Attention will now no doubt turn to Q2 as well as to the rest of the year. What is notable is that no-one is currently talking about how deals will pick up throughout 2014, as actually the big deals that have been done so far have been for generally good companies where competition for their acquisition was healthy.
It could well be the case that with an increased focus on exits and IPOs so far that firms have simply altered their objectives in the early part of the year, but at the same time many will be aware that they have huge piles of cash in some cases that they need to commit at some point in 2014.