CMF was in San Diego last week at the National M&A Conference for Middle-Market Private Equity sponsored by ACG. Attendance reached a record high with 2,000+, including over 200 walk-ins. The tempo was generally upbeat, although new deal flow has been “choppy” according to many managing directors at PE shops and sell-side investment banks.
Themes heard at the conference included the following:
- Funds have been aggressively working on their existing portfolio and are preparing for multiple exits within the next twelve months; beauty pageants amongst investment bankers are expected to increase and funds are deploying time and money into “prepping for an exit.”
- Investment banks and PE funds acknowledge that the quantity of new deals entering the top of the funnel has been “choppy” over the past four months, but there are relevant indicators, such as increases in sell-side investment banker pitches, that deal quality and volume will stabilize, with mandates expected to increase during the second half of the second quarter.
- Auctions appear to be getting more competitive, which could inflate deal prices at a time when leverage is reentering the market.
In order to gain more insight on fund activity, CMF surveyed PE executives and found that, based on recent activity, a majority of deals are taking six to eight months to close from first meeting to signing, deals are averaging 6x EBITDA multiples, and comparative sales 2011 over 2010 at the existing portfolio as a whole are expected to increase 5-10% organically – not bad in an economy that is growing 2-3%. Happy hunting for the balance of 2011!
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