Pulse of Private Equity – Research Results - Spring 2011
IMPROVING PORTFOLIO COMPANY PERFORMANCE IS TOP OF MIND FOR FUND MANAGERS ACCORDING TO NEW PULSE OF PRIVATE EQUITY RESEARCH REPORT RELEASED BY EISNERAMPER LLP
Forecast for First Half 2011: More Fund Activity and More Debt Financing Available; Limited Partner/General Partner Relationship Under Increased Scrutiny.
EisnerAmper today announced the release of The Pulse of Private Equity, its biannual research Report of private equity fund executives. More than 100 fund managers, all from the US and predominantly along the Northeast corridor, responded to the survey which measured fund activity, debt availability and portfolio fund performance, among other items.
Click here to view the Private Equity report.
The Pulse of Private Equity results show a continuation of trends revealed in the firm’s previous Survey (conducted in mid-2010) including a static level of sales or dispositions, but also some marked changes including a rise in the expectations for the closing of acquisitions, especially over the next quarter.
Respondents see the availability of debt financing increasing, with 83 percent anticipating increased availability for the remainder of 2011, and beyond. In terms of employment, 27 percent of respondents plan to increase staff size, paying increased attention to hiring operational expertise to assist with portfolio company management. Sector investment favors stable industries including business services, health care and information technology. The Survey measured the time spent by fund teams on certain activities and found meaningful increases in the time spent either working with existing portfolio companies, looking for work on new transactions or working on portfolio sales or liquidity events.
The concerns that fund executives have with respect to limited partners are significant. They rate their perception of the LP’s interest in due diligence as very high, especially as related to the manager (91 percent) and investments (83 percent).
In reviewing the data and in providing analysis, EisnerAmper Chairman Howard Cohen noted that the survey results “do not indicate any return to the characteristics of the private equity industry of past years.” Strategies reflect economic realities to the degree that, as Cohen states, “The LP and GP are more connected as are the fund and portfolio companies. There is opportunity to maximize value creation when funds optimize these tighter relationships.”
A number of observations can be drawn from the results as well. Peter Cogan, Partner and Co-chair of EisnerAmper’s Financial Services practice, cites several: “Trends suggest that, as the market accelerates its growth, managers should anticipate increased levels of competition for financing and talent.” Cogan also echoes the Survey’s findings regarding the need for more talent at funds. “There will be no loosening of control by managers over portfolio company operations and the best-run funds will continue to add bench strength in the form of operations personnel.” Developing close LP relationships built on transparency and trust is paramount, too, says Cogan. “Gone are the days of casual investors. Due diligence by the investors will steadily increase the pressure on fund teams to perform.”