GPs forecast dearth of deals in 2012

General partners in the US are expecting limited deal flow in 2012, according to accountancy and advisory house BDO.

A notable 70 percent of GPs, regardless of fund size, said in a survey they anticipate closing only two or three deals during the next 12 months. Nearly 40 percent of respondents expect to deploy less than $100 million in 2012. 

Still, the forecasted levels of investment activity would represent an increase compared to reported deal flow in 2011 from the survey’s respondents. During the previous year, 47 percent of GPs reported closing no new deals and 19 percent reported closing just one deal.

“I think it’s a relatively optimistic view,” BDO Capital Advisors managing director Jack Kearney told Private Equity International. “This is an indication that perhaps toward the end of [2011] they were beginning to see transactions and conditions in the marketplace which will enable them to do more investing.”

The majority of private equity firms surveyed with less than $250 million of assets under management – 66 percent – reported closing no new deals in 2011.

While the majority of respondents to the survey said they saw the overall value of their portfolio increase in 2011, 22 percent said that more than 20 percent of their portfolio companies are currently underperforming.

“There is a slight down trend in the increase in value, but 21 percent of the respondents indicate that none of their portfolio companies are performing below forecast, versus 10 percent a year ago,” Kearney said. “I think that’s awfully good.”

The largest percentage of respondents – 36 percent – believe South and Central America hold the greatest opportunities for investment outside the US, compared to last year when 59 percent chose Asia.

BDO’ survey analysed data from more than 100 private equity professionals in the US with assets of between $10 million and $72 billion.