In quarter one 2010 the total value of private equity investments in support services amounted to GBP1.1bn, equal to the total value recorded in the whole of 2009, according to a Grant Thornton report.
Competition is set to intensify in this sector in the coming months, according to the corresponding survey of 40 private equity investors with experience of investing in support service providers.
Eighty per cent of the financial sponsors that back support services expect to see an increase in competition from trade bidders, while 72 per cent expect the level of private equity investment in the sector to increase, according to the report.
"Although private equity houses have been investing in support service providers for more than a decade, we expect to see much fiercer competition in future sales processes. Both financial sponsors and bankers feel very comfortable investing in support services firms that demonstrate robust contracts and repeat business," says David Ascott, private equity partner at Grant Thornton.
Almost all respondents to the survey (97 per cent) said that they planned to make an investment in support services over the coming 12 months.
In 2009, support services attracted 37 private equity transactions with a total value of GBP1.1bn. That value is almost eight times lower than in 2008, when support services generated 120 private equity deals with a total value of GBP8.4bn.
In Q1 2010, the strong recovery in the value of private equity investments in support services is not down to exceptionally large individual transactions, as the largest transaction was Advent’s GBP274m takeover of Xafinity.
The most attractive subsectors within support services are business process outsourcing, operational support and facilities management, which were selected by 73 per cent, 52 per cent and 33 per cent of respondents respectively.
