The results of a survey to be released this week by the Association for Corporate Growth and Thomson Financial (publisher of PE Week), reveals an optimism that has been lacking recently.
Among other things, the survey shows that more than 83% of private equity respondents, and nine out of 10 of overall respondents, expect their companies to grow revenue this year. Plus, 85% of all respondents expect a jump in M&A activity and, similarly, two-thirds are predicting higher valuations.
The survey shows that two major stumbling blocks to recent deals – economic uncertainty and disagreement on valuation – are receding, indicators that may foretell a pickup in activity in 2004.
“From corporations to private equity firms to banks, and from small-market to billion dollar companies, there is optimism about the environment for corporate growth and deal making in 2004,” says Charles Downer, CEO of Downer & Co. LLC, who just stepped down as president of ACG.
The survey also touches on due diligence, which is always a relevant issue and particularly important at a time when many firms are busy looking at deals but at the same time can’t afford to deploy too many man-hours on a deal they may not end up winning.
According to the survey, private equity professionals aren’t leaving much to chance. Almost 72% of respondents said they have the lead partner on the deal and his or her team conducts the due diligence themselves. Only 15% give the job to an associate, while eleven percent hire a consultant to do the work.
“We do most of the due diligence ourselves. Our impression is that some of the bigger firms use a Bain or a McKinsey,” says Brian Conway, a managing director at TA Associates. “We will bring in KPMG or PwC when we want to comb through accounting issues and they may give us their view, but we really do our own work and make our own decisions. We make the phone calls rather than hiring a Bain.”
More than 1,300 Thomson clients, readers of Thomson publications (such as PE Week) and members of ACG completed the survey, which was conducted in December 2003.
This story originally appeared in Buyouts, an affiliated publication.