Tuesday, October 09, 2012

About Time for a PE Spending Spree?

US private equity funds raised $130.1B (326 funds) in the first three quarters of 2012.  Impressive...as this amount nearly matches the capital raised in all of 2011 ($131.5B).  
"Although it's far from easy to raise capital today, more private equity firms have the wind at their backs than [they] did even a year or two ago." said Laura Kreutzer, managing editor of Dow Jones Private Equity Analyst.  
Europe is also enjoying an upswing with a 20% increase in capital raised through the first three quarters of 2012 over last year.  >>Read more    
While current funding continues to be robust, US private equity executives face a ticking clock over funds raised in 2007 and 2008.  Nearly $200B needs to be spent within the next 12 months or it must be given back according to a recent NY Times article "More Money Than They Know What to Do With".

Due to economic uncertainty, there has been a "wait and see" approach to deal making.  However, the looming deadline is prompting a more proactive approach with firms realizing that it’s time to spend...  Clearly, firms are on the trail of the deal, with some engaged in “elephant hunting”, that is, seeking deals worth $10B. Collectively, PE firms have already spent $45B in the third quarter alone according to deal tracking source, Capital IQ. In this environment, Sellers are the Winners...as inflated acquisition prices are a likely result with so much competition for a limited number of deals.  

Keep an eye out for mega deal headlines...and an accelerated pace for deals. 

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