In 2016, Private Equity sector experienced a decline in deal flow driven by a number of factors. As less deals were coming to market, competition between buyers intensified. Higher purchase prices (and less leverage) are reflected in a future return profile for the industry that is lower than what we were used to. According to Valuewalk.com, 2017 will not differ much from last year, underpinned primarily by an impressive fundraising year with managers sitting on a significant amount of recently raised capital they will look to deploy.
Below, some selected statistics from 2017 PE Crystal Ball Report can be seen. Over 100 respondents (most of them from the middle market) participated in the survey, which allows us to capture fairly wide cross-section of the PE market.
Different firms prefer different investment strategies. The most popular investment strategies according to 2017 survey are Buyouts and Growth/Expansions by a wide margin.
In the question below, respondents were allowed to select all industries that apply to their firm. Most of them, however, do not focus on one specific industry.
As we can see below, most of the PE firms (81.3%) have been active recently.
On the diagram below, we can see the already mentioned decline in deal flow in 2016.
This year, deal flow is expected to remain at the 2016 levels. According to survey respondents, the state of the economy will be the main driver of PE deal flow in 2017. Traditional buyout investors will begin to look for more growth-oriented strategies and the line between PE and VC will become blurred this year, according to Pitchbook authors at Valuewalk. Finally, deal flow is expected to increase especially in healthcare and IT this year.