3 Trends Happening in Private Equity
According to the annual report of American Investment Council (previously known as the Private Equity Growth Capital Council), 3 emerging trends will affect PE firms during 2016:
- Valuations will Remain High
Good quality, well prepared businesses are still attractive to private equity forms (many of whom are still ‘cashed up’).
- Increasing Equity Contributions
This partly reflects banks’ more conservative lending stance, as well as high cash levels.
Lots of firms seeking to diversify and spread risk (as well as resources) by co-investing.
In the Australian market, recent negative publicity (mainly around Dick Smith) has seen only a rise in percentage of all deals in Australia involving PE (roughly 25% in United States and United Kingdom). This suggests there is scope for expanded activity in PE in Australia, despite the majority percentage of Australia’s deal flow being weighted heavily towards infrastructure, real estate and resources (three areas where PE is typically less active).
There has been a recent uptick in activity largely facilitated by an increased level of interest from international corporations particularly around the areas of materials, finance, health and education.