With new fundraising contributing to an already record amount of dry powder, private equity firms are facing a competitive dealmaking landscape and rising valuations for targets. With competition heating up, experts disagree on whether investment opportunities will be easier or more difficult to come by.
Toppan Vintage, a trusted financial printing and communications company, in partnership with Mergermarket, is pleased to present the newest edition of M&A Pulse newsletter. This newsletter features responses from US-based senior corporate executives who shared their insights on the current and future state of unicorn companies.
Toppan Vintage question: How will finding attractive investment opportunities change compared to 12 months ago? Leading deal experts weigh in...
As competition heats up among PE firms, a majority of our respondents believe finding attractive investment opportunities will become more difficult (24%) or remain at the same level (32%) over the next 12 months. At the same time, four in ten respondents think it will instead become easier to target new acquisitions in the coming year.
The advent of high-tech M&A targeting tools was the most controversial factor discussed by our respondents. Some feel that the tools create a deeper pool of potential targets; others argue that they make it more difficult to beat rivals to the punch for a specific asset.
“We bill something as attractive if we are getting ‘first mover’s advantage,’” said a managing director at a PE firm that buys mid-market software companies. “Now, because of things going digital, information has become easily dispensed and readily available. You don’t need analysts or valuation experts to dole out strategic information to you. You can access it in real time.”
Another respondent said the difficulty of finding new investments will remain the same, because the fundamentals of deal targeting have not shifted in any meaningful way. “It is not going to change – it is still all about identifying opportunities and evaluating risk,” said a managing director at an investment firm with over US$40bn in AUM. “Challenges will exist because of the inherent difficulties in finding suitable targets. PE buyers need to be very particular about the companies they acquire, and to do so will need to look into companies and their assets carefully.”