Survey: Private Equity Fund Managers See a Sunnier 2017


February 17, 2017

A study of private equity fund managers and their perspectives of the future show the industry could be facing a sunnier 2017. BDO’s Eight Annual Perspective Private Equity Study found fund managers optimistic about the year ahead. The trust for better days ahead comes after volatile 2016.


Private equity industry had a challenging year in 2016. PitchBook estimated the global PE deal value to have fallen by 12% from the levels in 2015. Furthermore, deal volume dropped by 14% due to lack of competition amongst strategic buyers and ballooning valuations.


The lack of deal activity was furthered by the volatile market and turmoil in the world of politics. Brexit and the US Presidential election caused jitters across the industry.


Better times ahead


Despite the trouble last year, the mood is about to change. BDO’s survey of 200 fund managers in North America and Western Europe suggests better times are ahead for private equity. Scott Hendon, partner and Private Equity practice leader at BDO, went on to say, “2016 served as something of a reset for the private equity industry, which experienced a rocky 2015.”


The positive mood has also continued to shift as the year has come closer. BDO held an initial survey last October when around half of the fund managers outlined their faith in the year being good for the industry. When the managers were later surveyed in January, the optimism had jumped close to 70%.


Fund managers are noticing calm in the markets and this is creating more stability and positivity among funds. The industry is looking forward to the new administration in the White House and the beneficial financial policies it might be implementing. Insight Equity CEO and managing partner, Ted Beneski, told BDO the year is likely to “see a strong push to reduce corporate taxes, create jobs through infrastructure development and spending, free up capital through tax reform and bolster American manufacturing”.


Focus on IPOs, yet slower fundraising


The renewed optimism was specifically evident in how fund managers viewed the IPO market. The fund managers mentioned the performance of the IPO market in 2016 as disappointing. The pessimism continued to show in the October study when only 4% of the respondents thought IPOs to be a lucrative exit option for 2017. By January, the percentage of believers had risen to 8% and BDO sees it as a suggestion the sector could be heating up.


Fund managers also have renewed hope for the overall deal flow to improve. Nearly 30% of fund managers think they will close two new platform deals in 2017, with around 25% set to invest $10 to $29 million.


On the other hands, fund managers have a gloomy view of fundraising. The BDO survey shows the least optimistic view for fundraising since 2014, with a little over 50% of managers stating they would be raising new funds. Even last year the number stood higher at 64%.


The industry seems to welcome the relative stability the markets are experiencing right now. With key elections taking place in Europe, the industry will nonetheless have to be prepared for the unexpected even in 2017.

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