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Alternative Market Briefing

Private equity eyes fresh targets for 2022

Monday, November 01, 2021

Bailey McCann, Opalesque New York:

Private equity deal volume is coming back according to new data from accounting and advisory firm BDO. A survey of 200 private equity fund managers suggests that 42% will be deploying capital to new deals in 2022. That's up from 19% this time last year. What's more, those deals appear to be actual new deals - just 16% of fund managers say they will be looking at add-on acquisitions.

56% of fund managers said the top driver of this deal flow will be private company sales and capital raises. The landscape of companies is also shifting - 50% of managers noted that succession planning was also driving sales. Take private deals came in a close third at 49%.

Verenda Graham, Co-Leader of BDO's National Private Equity Practice, notes in the survey that some of this may be driven by proposed tax increases. "Given that the tax increase affects dispositions, funds very likely will consider exiting some of their investments to lock in the long-term capital gains rate at 23.8%."

The flurry of new deal activity GPs are hoping for next year may run into a few hurdles, however. To be competitive in this deal market, fund managers are laying out more capital: 34% say they are paying higher multiples to win bids. Higher multiples, in turn, are putting pressure on the ability to generate returns.

GPs have also limited risk tolerance in light of the pandemic. "Risk is top of mind for fund managers-not just during due dilig......................

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