An abundant supply of capital and competition to identify and close quality investments frames CohnReznick’s “2015 Middle Market Private Equity Outlook.” While the industry is poised for the challenges that accompany a competitive deal-making environment and heightened regulation, the outlook for this year exudes expansion.
In brief, we foresee competition for quality deals and steep valuations to be continuing forces of pressure for middle market private equity firms. We anticipate that these are some of the topics that may influence the strategic direction of private equity during this year:
- Enhanced interest in single investor funds – Demand from large limited partners, including pension funds, endowments, and insurance companies is driving the creation of single-investor funds designed to capitalize on lower management fees,
- A shift to European-style diligence – Pre-sale due diligence, driven by investment banks and savvy sellers, is speeding up the deal process for private equity funds and dramatically altering the manner and pace in which deals are closing, and
- Emphasis on middle market investments – Private equity is expected to focus resources on middle market acquisitions and value building due to the explosive growth potential of that segment.
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