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19 Jul |
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 As the economy continues to improve, private equity group leaders say they have capital to invest and are actively seeking companies to acquire. This according to a survey of 75 private equity group leaders sponsored this summer by RSM McGladrey, a leading accounting and consulting firm in the U.S.
While the study found that buyers are everywhere, many high-quality would be sellers are waiting for the economy to turn solidly bullish and are holding out for even better offers. The survey also found: Interest in New Sectors: In contrast to last year, when private equity groups tended to add-on to existing holdings, 60% of respondents this year said their major focus for the coming 12 months will be on acquiring new businesses. Importance of Due Diligence: With the lessons learned from the recent recession still fresh in everyones minds, due diligence is more important than ever and will begin before buyers submit an offer or Letter of Intent. Almost one fourth (22%) of buyers reported that they intend to use outside advisors to conduct due diligence. Before the most recent downturn, buyers rarely used third-party due diligence before signing a Letter of Intent. Due diligence was something that was done after a Letter of Intent was signed. Understand Information Technology Costs: Almost half of the respondents indicated that they underestimated the IT costs involved in the deal-making process and the post closing integration of operations they acquired. Reporting Limitations: Almost half of the respondents reported that management reporting limitations resulted in the greatest post closing surprise (47%), followed closely by unforeseen capital expenditures (44%). Negotiate Heavily: Nearly half of those surveyed reported they had to make material adjustments to the purchase price 25% or more of the time as a result of material information discovered during due diligence. Moreover, 85% of buyers reported negotiating a purchase price adjustment in at least one transaction. "Well capitalized buyers are swarming the market place," said Richard Jackim, Managing Director of MidCap Advisors Chicago office. "Private equity firms have raised over $450 billion and they have their checkbooks out. During the last two years they were anxious to find bargains - now they just want to find good quality companies to invest in to get their capital to work." |
