PitchBook Dealmakers Column
The current private equity deal-making environment is dynamic, marked by several key factors that may seem at odds with the economic landscape.
It is counter-intuitive to think that there is a liquidity surplus of both debt and equity capital. Not only are there plenty of funds available, interest is strong from all lender/investor constituencies. Companies with solid operational profiles and sound financial reporting are being well received by all funding sources.
The senior debt market has eased, with aggressive competition from banks and non-bank lenders, according to Hilco Global thought leaders. Traditional limited partner funds, credit opportunity funds, captive bank funds, hedge funds, commercial finance companies and insurance companies have all created pricing pressure on traditional lenders. This significant cross-section of investors is competing for a limited number of quality transactions whose credit standards remain basically unchanged. Risk aversion has relaxed, opening the market to non-sponsor private equity companies, challenged credits and traditionally avoided industries.
There is also excess capital in the PE market as the window appears to be closing for various general partners to invest a significant portion of their “dry powder” that accounts for the approximate $543 billion capital overhang in the U.S., according to PitchBook. In short, if you are an active buyer (strategic or financial) looking for an attractive, well-performing company in today’s marketplace, it is likely to be an extremely competitive process as sellers are in the driver’s seat.
To learn more about the PE dealmaking environment, read PitchBook’s latest Deal Multiples & Trends Report, which features a full Q&A from Hilco Global thought leaders.
This article represents the views of the author only and does not necessarily represent the views of PitchBook.