This month’s issue of the monthly executive brief providing M&A market insight for C-level management and their professional advisors.
Private equity is a major source of funding for middle market business acquisitions and recapitalizations. We take notice when PE statistics are released, as they are a good measure of the private capital markets. Private equity deal data for the first half of 2012 is in and the numbers aren’t pretty for the private equity firms, but the underlying message is good for private company owners.
Despite beginning the year on an optimistic note, PE deal volume is down 17% in the second quarter compared to Q1 2012. Compared to last year, the number of deal closings are down a disappointing 39%. Private equity buyers aren’t happy about this. Their job, after all, is to buy or recapitalize companies now for a future return a few years out.
Private equity firms have $405 billion in idle cash that they need to invest. That’s more than they have invested over the last six quarters combined. We are seeing this demand for deals by increasing contact from private equity firms contacting CFA offices asking about our new clients. We interpret the current market as a “sellers’ market” where we get multiple bidders on companies that we are selling.
Q2 also saw the continued use of add-on investment strategies by PE firms. Firms are looking to make add-on deals due to a lack of new investment opportunities. Nearly half of all PE deal flow in the first six months of 2012 has been in the add-on space and we foresee this trend continuing to play an integral role through year’s end.
For more information contact:
Douglas Nix, CA | Vice Chairman CFA
905 845 4340 ext. 211