Baird’s Coetzee: Platform-size deal activity could dominate early 2017

  • Shift to more platform acquisitions possible
  • Expensive prices have stoked more add-on and build-up efforts
  • LPs may reallocate more capital into PE


Sure, M&A bankers may be known for their optimism. But Baird’s Chris Coetzee said it’s realistic to expect the first quarter of 2017 to outpace the previous two year-ago periods in the sponsored-deal market.

Unlike the start of 2016 and 2015, the early part of the new year won’t bring a lull in mergers and acquisitions, based on the firm’s visibility into its deal pipeline, Coetzee said in an interview in late December.

“The first quarter will definitely be stronger,” said Coetzee, who is managing director in the financial-sponsor unit of Baird. “We’re feeling upbeat about the M&A environment. We’re seeing a very strong backlog of sell-side deals.”

Over the past few years sponsors have been investing in build-ups through add-on deals to avoid competitive auctions for larger companies.

Nowadays, Coetzee sees more activity coming that’ll involve more typical platform-size deals in 2017. More platform acquisitions can result from a healthy fundraising period for GPs, he said.

“There’s an accumulation of capital that needs to be put to work,” Coetzee said. “It continues to build.”

A rise in public-equity prices may also cause more capital to move into private equity as institutional investors work to maintain their allocation levels to the asset class, he said.

More capital may also come from European GPs interested in middle-market U.S. buyouts, he said. A longer-term trend helping deal-making is the increasing familiarity that family-owned companies have with PE firms, he said.

“Ten years ago, there was more nervousness about private equity firms,” Coetzee said. “Now, it’s so much more mainstream.”

Action Item: Chart of Q4 deals from the Dec. 26 Buyouts: Q4-2016-deals

Photo of Chris Coetzee courtesy of Baird