InSight

Exit and Growth Strategies for Middle Market Businesses

It’s a Seller’s Market For Now – Private Equity is Very Active

By Catherine Patience | Sep 27, 2016

seller's marketThe flow of private equity funds into industry sectors is an ever changing investment stream channeling to the most attractive perceived returns on investment.

In 2015, a mega deal in the Business & Consumer Products and Services sector accounted for roughly half of the $103.8 billion invested by US private equity.  With the backing of 3G Capital and Berkshire Hathaway, H.J. Heinz Company and Kraft Foods Group (NASDAQ: KRFT) merged to create The Kraft Heinz Company, forming the third-largest food & beverage company in North America.

While not nearly as large as the Kraft Heinz deal, several deals in the Technology/Media/Telecom sector boosted 2015 investment significantly over 2014.  The $5B Informatica PIPE (private investment – public equity), $3.7B Riverbed Technology investment by Thoma Bravo and others, and the $3.5B Ellucian investment by TPG Capital collectively contributed to a substantial increase in this sector over 2014. So what does 2016 look like so far this year? Technology/Media/Telecom looks to be hot again this year.  A handful of large deals in this sector have already closed including; a $15B investment into ADT Security Services by Apollo, Koch and Protection 1, a $7.4B investment by The Caryle Group into Veritas Technologies, and billion dollar private equity investments into Solera Holdings, Solarwinds, Qlik Technologies and Marketo to name just a few.

The private equity community continues to be extremely active.  As of the end of 2015 PE dry powder across North America and Europe was $749B.  This is about the level at the end of 2014.  Debt capital remains cheap and plentiful with many non-bank funding sources ready to step in when traditional lenders are reluctant.

Companies looking to sell, secure growth capital or desiring a partial liquidity event are now operating in an extremely good environment. In fact, sourcing worthwhile deals has become a major challenge for private equity as valuations are high and the deal flow has been limited.  It is definitely a seller’s market, at least for now.

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