Buyout fund sponsors are optimistic about fundraising despite the crowded market, the accounting firm Ernst & Young LLP reported. The firm said that 75 percent of general partners in a survey said they expect the fundraising environment to improve or remain the same in the coming year, despite uncertainties about the economy.
“It’s a lot tougher than pre-2008, when funds were being raised virtually overnight,” Jeff Bunder, global private equity leader at Ernst & Young, told Buyouts.
In the E&Y survey, which included both buyout firms around the world and their investors, 41 percent of GP respondents said they expect prospects for fundraising to improve in the coming year, while 34 percent said they expect the environment to remain the same. Only 25 percent said they expect fundraising to become more difficult.
Where some sponsors were closing their funds in six months or less during the peak years in the middle of the last decade, today GPs are taking as long as two years to raise funds that are significantly smaller, Bunder said. “We’re hearing they’re successfully getting commitments, where a year ago we weren’t hearing that.”
E&Y surveyed a panel of 100 private equity executives for the report, part of a larger poll conducted during August and September of more than 1,500 corporate executives from 41 countries.
Conditions vary widely based on geography, based on E&Y’s global survey. European sponsors continue to struggle, as the Continent’s economies slump into recession and banks, governments and individuals all continue trying to deleverage their balance sheets.
North America represents a more stable environment to investors, while emerging economies, such as rapidly growing Asian markets, continue to attract interest. That doesn’t mean that investors are sanguine, Bunder said, noting that China’s economy has been slowing, raising investor concerns. In Asia, he said, “It’s gloom and doom at seven and a half percent” economic growth.
In the survey, 83 percent of GP respondents that are active in Asia said they plan to increase their acquisition activity over the next year in “emerging Asia,” while 72 percent said they would step up activity in both China proper and in the United States and Canada. GPs, by a 48 percent vote, plan to leave dealmaking activity unchanged in western Europe and 58 percent plan no change in Latin America, the survey showed.
The slow growth environment, with strategic buyers largely on the sidelines and economic prospects middling at best, also puts a damper on dealmaking, but financing is available, especially in the United States, Bunder said. “That’s probably easier in terms of getting a deal done in the U.S.”
And that is a relatively bullish assessment, considering that 34 percent of GPs said that their local economies have weakened, compared to 19 percent when E&Y did its last survey in April. “People are not necessarily that comfortable with the economic growth prospects,” he said. “They don’t see any signs of an improving economy.”