Private equity firms are benefiting from significant market tailwinds triggered by historically low interest rates as well as record fundraising, which is at an all-time high with PE dry powder at vast amounts. Additionally, we are seeing an increase in new funds being set up by experienced PE professionals from already established funds, resulting in high levels of deployable capita.
PE firms are transforming into diversified alternative asset managers with stakes in a number of asset classes as competition for traditional PE acquisitions grows, putting pressure on returns.
- Insurance companies are a popular PE target, by gaining access to insurance companys’ balance sheets, they enhance AUM, produce extra fee income, and provide a source of permanent capital.
- We predict increased acquisition activity as a result of tax uncertainty, as PE firms and founders seek to lock in gains before capital gains taxes rise. Value creation and the growth strategy for portfolio businesses is rapidly becoming a focus for PE funds, given the rising multiples paid for assets.
- From the screening phase of deal making until the exit of an investment, we expect environmental, social, and governance (ESG) issues to become an intrinsic component of a sustainable value creation strategy for portfolio firms. As a result, we anticipate PE firms conducting a more in-depth study of ESG risks throughout their portfolio and being more selective in their target companies.