Private Equity Pulse - Executives Survey 2010

Table of Contents:
Executive Summary: Key Survey Findings
About the Research
The Pulse of Private Equity
About EisnerAmper & Contacts 


The Pulse of Private Equity employs research findings from senior private equity fund executives together with Eisner analysis and industry observations to explore market trends. The Report contains data on transaction and deal flow, debt financing, fund activities and level of portfolio company interaction, as well as views on limited partners’ concerns. It offers a comparison, from the private equity executives’ point of view, of activity at private equity firms for the first half of 2010 compared to the first quarter 2009, along with their outlook for the second half of 2010.

While the executive summary outlines the results, we invite you to read the entire Report for additional insight. Emerging or now-established trends are noted along with our observations from the research and we reference supporting market data. Our intent is for the Report to be of assistance when thinking about the private equity market as well as serving as a benchmark of your firm’s level of activity versus the respondents. We hope you find this Report useful and that you’ll share your thoughts and ideas with us.

Executive Summary: Key Survey Findings 

Eisner Intelligent Data (Eisner ID) surveyed private equity executives to obtain their views of their firms’ fund activity. Their insights are consistent with our sense that market activity is on the rise. The Report’s aggregate results suggest that an improvement in private equity activity is underway.

Survey respondents shared their insight into market trends over three periods of time: results from Q1 2009, 1H 2010 and projections for 2H 2010. Our findings can be summarized as follows:

  • More Debt Financing Availability. Compared to Q1 2009, 60 percent of the executives surveyed saw an increase in debt financing availability in Q1-Q2 2010. 68 percent also anticipate an increased availability of debt financing for the remainder of 2010.
  • More Transactions. 70 percent of respondents project more acquisitions for the period July to December of this year vs. early 2009. 60 percent felt there would be more sales and/or dispositions. In addition, 70 percent of private equity executives surveyed expect an increase in bidding activity for acquisitions for the second half of 2010. Private equity executives are bracing themselves for an active but difficult bidding environment.
  • Moderate Increase in Employment. Due to a shift at private equity firms in 2009 from new investment activity toward portfolio performance enhancement, their employees’ responsibilities shifted as well. For the second half of 2010, fund executives are showing moderate upward pressure to bring on additional professional staff. This is consistent with their projection for more business activity while sustaining current activities with the portfolio companies.
  • Higher Level of Due Diligence Activity from Potential Investors. The executives surveyed felt that investors’ interest and focus on due diligence, as it relates to the fund manager and to the investments, will continue to rise in the second half of 2010.

About the Research  

This Report was designed to take the pulse of the private equity market in relation to last year coupled with an outlook for the second half of 2010. Private equity executives were asked to comment on their firms’ activities over three distinct periods of time:

  • Looking back to Q1 2009
  • Q1-Q2 2010 (Interviews were conducted from March 4, 2010 through April 18, 2010)
  • Outlook for 2H 2010

The 120 respondents were primarily general partners as well as managing, executive and other directors (59 percent). The other respondents were a cross-section of principals, other partners, CFOs, COOs and vice presidents, among other senior positions.

 Respondents were from aPrivate-Equity 1 representative cross-section of firms which varied in size as shown in Figure 1.

96 percent of the respondents were from the U.S. with the New York/ New Jersey/ Pennsylvania/ Connecticut corridor representing 37 percent of the responses.

The survey results were prepared by Eisner LLP, and are presented with Eisner’s observations of the private equity market, plus references to other third party data. While Eisner believes the information to be from reliable sources, it should not be relied upon as or considered to be investment advice.

Eisner Intelligent Data (Eisner ID) uses proprietary market research conducted by Eisner and leading market research firms, along with analysis from Eisner’s partners and principals, to produce insightful articles, events and data designed to educate and stimulate discussion on the issues of most interest to business leaders today.

Eisner ID Contact: Susan Wittner, Director of Marketing, 212.891.6989

The Pulse of Private Equity  

Much has been discussed on the apparent awakening of the private equity market and the more optimistic outlook for the second half of 2010. We wanted to learn how the executives involved directly with fund activity viewed early 2010 activity vs. their expectations for the rest of the year. We also asked them to also reflect on the period most of them might prefer to forget, Q1 2009. Their input provides an excellent perspective on this challenging two-year period.

"One can speculate that private equity executives’ appetite for M&A is quite big right now with a pent up interest in deal-making. On the disposition side, they could be waiting for additional sector-specific recovery to ensure maximization of price achievement."

Joel Barth
Principal Corporate Finance Group

Eisner asked private equity executives a variety of questions about their view of their firm’s fund activity. Together their insights are consistent with market indicators showing activity on the rise. Viewing the aggregate results, as well as each topic on its own, suggests that an improvement in private equity activity is underway.


The pulse of the market can be taken with a view of the recent and expected flow of transactions for acquisitions, and sales or dispositions. 63 percent of the executives responded that the early 2010 level for closing of acquisitions was more than Q1 2009. In addition, a larger percent of respondents (70 percent) project more acquisition transactions for the period July to December of this year versus early 2009 (See Figure 2.) Only a very small percentage of respondents (six percent) felt that there would be fewer acquisitions in the second half of 2010.

Sales or dispositions are also expected to rise in the second half of this year. There is a difference in the type of activity the executives expect: While 70 percent felt that 2H 2010 would bring more acquisitions, only 60 percent felt it would bring more sales or dispositions. (See Figure 3.)

private equity 3 

“The most striking information here is the almost negligible number of private equity executives who think that the competitive bidding process activity has and will remain unchanged. The competition for deals is mounting.”

Nicholas Tsafos
Partner, Financial Services

The respondents see the M&A competitive bidding process increasing significantly. (See Figure 4.) Very few reported a decrease in early 2010 vs. early 2009 (and they project even less of a decrease for the rest of this year.) With 70 percent seeing an increase in bidding activity for acquisitions for the second half of this year, the private equity executives are bracing themselves for an active, but competitive bidding environment.


Debt Financing Availability 

The respondents see the availability of debt financing for transactions continuing to increase for the rest of the year. (See Figure 5.) Compared to Q1 2009, 60 percent saw an increase in the first half of 2010 and 68 percent anticipate an increased availability for the remainder of the year. A handful (seven percent) saw a decrease in availability for the remainder of the year.

Availability of Debt Financing  

Exit Opportunities A thawing of the debt market is apparently underway and survey respondents expect additional availability of debt financing for transactions in the second half of the year, thus helping to further open additional exit opportunities. Private equity exits were infrequent in 2009 until their re-emergence in the fourth quarter. The Association for Corporate Growth used Pitchbook data to project trends reporting that there were 65 completed exits for private equity investors during the first quarter of 2010 vs. only 31 in the same period of 2009. They also cite 49 U.S. PE-backed companies in IPO registration through Q1 2010, with forecasts for additional and larger IPOs in 2H 2010.

“Carried interest had everyone re-evaluating their options. The proposed sweeping changes in tax treatment for private equity caused owners to look at their exit options differently. The uncertainty at the time of the survey concerning carried interest would drive fund managers to evaluate exiting certain holdings in 2010 if it would be advantageous before tax rates potentially increase.”

Christopher Loiacono
Co-Chair, Tax Advisory Services Group

The private equity market activity had been idling due to a combination of market forces. According to, the total U.S. private equity deal flow was relatively the same throughout 2009 and into Q1 2010 versus the historical level of deal flow. Looking further into the data, the deals in Q1 2010 did increase by 10 percent vs. Q4 2009 which represented the third straight quarter showing an increase; however the annual trend is relatively flat vs. previous years.

So, what was happening? Sellers were unwilling to part with their assets at the less than desirable multiples that were being offered. This, compounded with the limited availability of debt financing, slowed most private equity activity. This occurred while the dry powder for buyouts, i.e., the committed but uncalled capital for private equity, remains at approximately one-half trillion dollars, according to data from Preqin.

While the executives were not surveyed on the topic of carried interest, changes in the treatment of carried interest have been closely watched by private equity firms during both deal structuring and in looking ahead at exit strategies. With this issue looming at the time of the survey, short term activity could be affected in 2010. More clarity on these potential changes could have changed the respondents’ outlook for the remainder of 2010.


Employment projections help to balance other projections. Respondents projected a moderate increase in the number of professionals employed in their firms.

“We’re observing a variety of strategies being employed by fund managers for sector investing. There are many industries that private equity is targeting for distressed investments, in addition to growth verticals that they want to add to their portfolios.”

Anthony Minnefor
Partner, Financial Services

The increase of 29 percent for July-December 2010 vs. Q1 2009 was larger than the increase they were seeing in the first half of 2010 vs. Q1 2009. (See Figure 6.) With the shift in activity at funds in 2009 more toward portfolio performance enhancement, employee resources also shifted. In the second half of 2010, fund managers report moderate upward pressure to hire additional professionals, consistent with their projection for more business activity.


Sector Investment 

The survey respondents indicate a slight narrowing of their focus on sectors for investment in 2H 2010. (See Figure 7.) Some attractive sectors for buyouts cited are healthcare, life sciences and business services. 62 percent of survey respondents said their investment focus would remain unchanged for second half 2010 vs. Q1 2009.

The PitchBook Annual Private Equity Breakdown 2010 cited the following number of deals by industry as the most active for 2009: 

  # Deals  
Business Products & Services (B2B) 312
Consumer Products & Services (B2C) 232
Information Technology 137
Healthcare 125
Energy 69
Financial Services 68



Time and Activities 

“The respondents clearly shifted their activities in the first half of 2010 with a significant increase in their time spent on looking for or working on portfolio sales or liquidity events. Fund raising, as well as looking for new transactions, both increased over this period. We can look at the current market and agree that the shifts that they saw in Q1 and Q2 are continuing. Our survey respondents told us they would.”

Peter Cogan
Co-Chair, Financial Services Practice Group

The survey explored the amount of time that private equity fund professionals spent, over the three periods, on a variety of activities. The intent was to identify shifts vs. last year and expected changes for the second half of 2010. Reflecting on Q1 2009, the respondents said that their teams spent the most amount of their time working with existing portfolio companies as attention was diverted to the portfolio companies during a time when investments and divestitures were constrained due to the market’s stagnant situation. It is interesting to note that time allocated to looking for or working on new transactions was still rated high. Figure 8 presents their activities in Q1 2009.


From this baseline in Q1 2009, we can look at the trends or shifts in the funds’ time allocated to these four key categories. In Q1-Q2 2010, the ranking of time remains the same, but the percentages shift dramatically in all but their time spent working on existing portfolio companies. (See Figure 9.)


Looking ahead to 2H 2010, the respondents further increased their outlook for fund raising activities with 54 percent of respondents ranking fund raising as moderate to high vs. only 37 percent in 1H 2010. The other areas were seen relatively the same throughout 2010. Figure 10 compares the shifts from 1H to 2H 2010. 


Limited Partners 

Private equity executives were asked to give their view on the importance their limited partners placed on fund operations which is summarized in Figure 11.


The results showed from Q1 2009 to 1H 2010:

  • Due diligence related to fund management remained the highest interest area among LPs with an increase from 69 percent to 78 percent.
  • The next focus area of the LPs was seen as the due diligence process related to investments. The respondents ranked this as the second most important area of focus for LPs in Q1 2009 and for Q1-Q2 2010.
  • The respondents saw an increase in the LPs’ interest in management and incentive fees and other expenses increased from 59 percent in Q1 2009 to 67 percent in Q1-Q2 2010.
  • The fair value investment valuation process also remained an area of concern.
  • 2010 saw an increase in the LPs’ interest in other fund terms such as lockups and commitments.

In looking ahead to 2H 2010, the respondents identified the areas of interest for their LPs, where they noted a slight increase in the interest in fair value investment valuation process and other fund terms. Due diligence as it relates to both manager and the investments remained high at 78 percent and 75 percent, respectively. The respondents felt that there would be a slight reduction the LPs' interest in expense-related topics.


Several observations for private equity funds emerge:

  1. Benchmark your activity. Review the data and compare it to your firm’s outlook to identify similarities and differences from the respondents. Benchmarking is a useful methodology for comparing your firm’s activity level to a peer sample.
  2. Get ready for more competition. Current trends point to increased competition for deals. The amount of dry powder is significant and some funds may be anxiously looking for good deals. Anticipate increased competition in the bidding. Solid up-front due diligence, valuation and preparation are essential.
  3. Acquire with eyes wide open. Not all transactions are good transactions. The recent downturn left private equity funds with portfolio companies that could not be turned around quickly. Fund managers are returning to their roots of adding value to purchased companies to reap the benefits of improved assets upon exit.
  4. Expect the focus on portfolio management to continue and gear up for it. The focus on portfolio management support from the fund team is expected to continue. While the private equity team will potentially become more involved in transactions, the benefits from working with the portfolio companies are still desirable. This can affect the skills that you seek for new employees.
  5. Transparency. Transparency. Transparency. Seek support to meet your LP’s needs for more transparency and assurances that their investment is in good hands.

About EisnerAmper 

EisnerAmper is one of the premier accounting and business advisory services firms in the country. Founded more than 45 years ago, EisnerAmper provides auditing, accounting, and tax services to public and private firms across North America and internationally. The firm’s primary concentrations are in financial services; services to public companies; personal wealth advisory services and technology, sports and media. EisnerAmper provides services to over 150 private equity firms and 600 hedge funds. EisnerAmper also offers a complement of business advisory services in corporate finance, litigation consulting and forensic accounting, bankruptcy and insolvency, employee benefits, entrepreneurial and start-up services, internal audit and risk management among others. EisnerAmper’s clients, from individuals through mid-size companies to Fortune 500s, all share a requirement for responsiveness that is the hallmark of EisnerAmper’s client service mission. EisnerAmper’s headquarters are in New York City with offices in New Jersey, Long Island and the Cayman Islands. EisnerAmper is an independent member of PKF International.

Peter Cogan, Partner 

Peter Cogan is the lead audit partner for financial services at EisnerAmper with a concentration in serving private equity firms. Peter has more than 20 years of audit, tax, and business consulting experience and co-chairs EisnerAmper’s financial services practice. Peter serves as partner-in-charge of some of the firm’s largest hedge and private equity fund clients. He is also a member of the firm's executive committee and is a director of EisnerAmper’s Cayman Island office. Peter speaks frequently before professional audiences, and is one of the leaders of EisnerAmper’s training program for financial services staff. He is a member of the American Institute of Certified Public Accountants and the New York State Society of Certified Public Accountants (NYSSCPA) where he currently serves as a member of the Investment Company Committee.

Christopher Loiacono, Partner 

Christopher Loiacono is a tax partner and co-chair of the tax advisory services group with a focused concentration in private equity. He is a member of EisnerAmper's executive committee and is experienced in working with private equity and other financial services companies as well as publicly and privately held companies. Chris provides tax planning for companies and senior management in many industries, including financial services, manufacturing and distribution, software and technology, retail, media and entertainment. Chris also serves LBO funds, venture capital funds, hedge funds, securities broker-dealers, and investment advisors. Chris is a frequent guest on CNBC’s Power Lunch and has been quoted in many top business media outlets, such as The New York Times, The Wall Street Journal, and Crain's New York Business.

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