Record levels of dry powder and new investment models to fuel PE activity
Private equity is likely to be one of the biggest stories in M&A over the next 12 months, with corporates being challenged for assets more than during the past five years. Private equity has rebounded in 2017 and is set to take a bigger role in the competition for assets.
The traditional private equity model has an average investment holding period of three to five years. But as the industry matures, it is experimenting with variations on this theme. With an investment period that is double that of a classic fund, new long-life funds are under much less pressure to deploy capital quickly, while retaining the ability to make big-ticket purchases.
With the flexibility to hold portfolio companies for much longer, they can achieve operational efficiencies over a longer period. Also, if economic conditions deteriorate, they can wait out the cycle rather than divest into an unreceptive market. Cross-border dealmaking will also be prominent as companies look to tap into new areas of growth. With concerns on the horizon about increased cross-border M&A reviews and the potential for barriers, executives are more likely to take this window of opportunity to move into those markets that offer greater potential for future growth.