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Private equity houses target consumer industries for public-to-private deals, says BDO

Private equity houses have ranked publicly listed companies in the consumer industries sector, including personal goods, food and beverage and household items, as the most conducive to pri

Private equity houses have ranked publicly listed companies in the consumer industries sector, including personal goods, food and beverage and household items, as the most conducive to private equity-backed public-to-private deals over the next five years, according to a survey from by accountants and business advisors BDO Stoy Hayward.

Asked by the authors of the Public-to-Private survey which sectors would be the most conducive to public-to-private deals in the coming five years, 82 per cent of private equity houses cited quoted companies in the consumer industries sector. Financial services and retail and leisure were both viewed as conducive to such deals by 76 per cent of respondents.

According to the survey, 94 per cent of private equity firms are likely to consider public-to-private deals over the next two years.

Institutional fund managers ranked quoted companies in the media and internet sector as most conducive to public-to private deals over the next five years, followed by the IT and retail and leisure sector with 58 per cent.

Both private equity houses and institutional fund managers said the sectors least conducive to public-to-private deals were aerospace and defence (cited by 41 and 32 per cent of the respective group), energy and mining (35 and 26 per cent respectively) and automotive (18 and 36 per cent).

The survey also found that 52 per cent of institutional fund managers believed shareholders would welcome a public-to-private transaction proposal while only 2 per cent said they were unreceptive to such deals and 2 per cent said they would be hostile. Nearly half of the institutional managers that responded (48 per cent) say they may encourage investee companies to seek public-to-private funding within the next two years.

‘The City always used to be suspicious and somewhat sniffy about public-to-private deals, but now fund managers want cash and are keen to receive takeover proposals,’ says Alex White, a corporate finance partner at BDO Stoy Hayward.

‘Quoted companies are being starved of equity finance and so cannot fund takeover bids. That means private equity is the only game in town. This is good news for the 48 per cent of management teams who, if they had their time again, would not choose to float their company.’

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