Deloitte on record private equity ‘dry powder’ and expectation of M&A activity
Commenting on private equity ‘dry powder’, and the expectation of M&A activity in the months ahead, Richard Parsons, head of private equity coverage at Deloitte said:
“As of July this year, there was a record US $1.16tn available for investment sitting in private equity funds, according to the Preqin Quarterly Update. From the final quarter of 2008, until early 2013, the private equity fundraising market was tough, which had proved a major distraction for houses looking to raise new funds.
“Now most of the larger funds have successfully raised new funds they are actively looking at ways to deploy their capital into growth opportunities. However, it remains a sellers’ market which is driving pricing upwards and creates challenges for firms looking to deploying capital into new deals. As a result, private equity houses are likely to consider different geographies, sectors and investment strategies as an alternative if they wish to avoid buying and selling from each other.
“Investors in private equity firms, which include pension and sovereign wealth funds, now have a greater risk appetite and are looking for returns in an environment with relatively low interest rates. They see the private equity market as being able to provide this.
“So far, we haven’t seen any huge leveraged buyouts, with the debt markets not strong enough to support a multi-billion cheque. However, the ongoing recovery in the debt market coupled with the wall of ‘dry powder,’ controlled by private equity, means we could start to see some significant M&A deals in the coming months.”