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GPs predict bigger and more mid-market deals

The majority of mid-market GPs expect the volume and value of mid-market transactions to increase over the next year according to Grant Thornton Corporate Finance’s quarterly mid-market barometer.

The sectors thought most likely to benefit are business services (19% of sample), healthcare (17%) and financial services (10%).

In terms of deal volumes just 2% of respondents expected the number of transactions to decrease over the next year with 34% reckoning activity will remain similar while 64% predict an increase. In terms of future deal values, 6% expect a fall, 49% anticipate similar levels, while 45% believe valuations will increase.

“The future outlook by mid-market VCs is clearly very positive”, says Mat Bhagrath, partner at Grant Thornton Corporate Finance. “Having achieved some good exits in 2004, and consequently streamlined their portfolios, VCs are likely to enter 2005 in aggressive mode, scouring the market for good opportunities. This does not herald boom times ahead, as VCs will still act with a good degree of caution, however, good deal volumes and competitive pricing is likely.”

He continued: “Overall, record fund raising on the AIM market during the third quarter of 2004, and with UK M&A deal volumes at their highest level since 2000, the market is looking in good shape. The current spate of successful exits will prove a positive driver in generating further mid-market activity, and consequentially we expect to see a good number of private equity investors hungry for new deals in the coming months.”