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PE competition heating up, good times continue to roll

“Global deal activity jumped 47% between 2013 and 2014, highlighted by large deals,” wrote John Primack in an article for “Global merger and acquisition activity hit USD3.5 trillion in 2014, which is up 47% from the year before.” 

Primack noted that the data from Thomson Reuters “suggests that large deals in 2014 – 95 valued at USD5 billion or more – were a key driver, given that the overall number of global M&A transactions only climbed by 6%.” Of the 15 largest acquisitions, 10 were from companies based in the United States, “where volume climbed by 51.4% to USD1.53 trillion.”  

One thing is for certain, private equity competition is mounting. Top firms are trying to stand out among the pack and it is exceedingly difficult. Large behemoths are entering the middle market like William E Conway, Jr of Carlyle, David Bonderman of TPG and Stephen A Schwarzman of  Blackstone trying to take market share from the niche players in the space like Ted Virtue of Mid Ocean Partners.  

Industry experts seem to be bullish when it comes to private equity this year. Lawrence Delevingne of CNBC even goes as far as declaring 2015 as ‘boom time’ for PE. “Deals are happening virtually daily. Money from pensions, ultra wealthy families and other investors is pouring in. Credit is cheap, making levered purchases of companies relatively easy. And businesses are being sold by PE firms at lucrative prices.  All that makes the industry optimistic for more.”

In his article, Delevingne quoted both Steve Judge, head of the Private Equity Growth Capital Council and Adley Bowden, senior director of analysis at Pitchbook, who both share the same positive outlook when it comes to PE this year. "We are seeing positive indications for a strong 2015… Within both the private equity environment and the broader economy, there is enthusiasm for investment and putting capital to work in the coming year,” said Judge. Bowden, for his part, had this to say: "We expect 2015 to be even more active for private equity investors as they continue to adapt… and the tail winds of significant dry powder, active M&A market and recovering economies help drive deals." 

This year also promises to be advantageous to specialist funds such as Ted Virtue’s MidOcean Partners as the rise of specialisation is also one of the themes in PE for 2015. Forbes contributor Antoine Drean, in his recently released ten predictions for Private Equity in 2015, wrote that “[p]olls carried out this past fall among the more than 900 limited partner firms… reveal that 89 per cent of investors believe increasing specialisation is ‘the future of private equity,’ while 60 per cent said a majority of their annual PE capital commitment would probably go to sector specialists, rather than generalist funds. Investors are increasingly finding the most promising opportunities in niches with relatively few competitors.”

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