Senior executives at private equity firms do not believe there will be a flood of new deals in 2010 and expect to transact about as many deals next year as they have in 2009, according to a study from accounting firm BDO Seidman.
BDO Seidman surveyed about 100 general partners with between $10 million to $1 billion in committed capital.
The GPs overwhelmingly (76 percent) said they don’t expect deal flow to reach the levels of 2007 until 2011 or beyond.
“The lack of senior debt available, combined with pricing concerns, means funds will continue to face significant challenges as they work to source and close deals,” Mat Wood, partner with BDO Seidman’s private equity practice group, said in a statement.
About 76 percent of the executives surveyed reported closing between one and five new deals between the third quarter of 2008 and the third quarter of 2009. About 82 percent of those surveyed expect to close between one and five new deals over the next year.
Only 2 percent of those surveyed anticipate closing no deals in the next year, according to the survey.
More than half of the executives in the survey said the overall value of their portfolio has decreased in the past year. About 56 percent said that more than 20 percent of their portfolio is performing below expectations.
Amid decreasing performance, almost all the executives said they reduced headcount at their portfolio companies, while 81 percent have renegotiated debt and 83 percent have reassessed their market strategy.
About three out of every 10 executives have declared bankruptcy for one or more portfolio companies and 38 percent have hired restructuring professionals.
Private equity executives believe the best investment opportunities are in healthcare and manufacturing industries, followed by natural resources, financial services and technology. Only 3 percent of respondents anticipate opportunities in media and only 2 percent in retail.