Private Equity Ready For Opportunities, Says Ernst & Young
PRIVATE equity companies are ready to pounce on deals, despite global economic uncertainty, and their only problem could be finding quality deals at the right price, Ernst & Young said on Thursday.
Investment by private equity companies has been affected by the global downturn as investors stay on the sidelines and sellers hold on to assets, unwilling to let them go at any cost.
In its latest Private Equity Capital Confidence Barometer, Ernst & Young said private equity companies had a better appetite for mergers and acquisitions deals than other corporate buyers, which was buoyed by improving access to credit and fund-raising opportunities.
The survey, carried out worldwide last month among 120 global investors, showed private equity investors were ready to do deals, and 43% intended to sell more assets in the next year.
"However, more than a third of (private equity firms) showed concern about the quality of the deals currently on the market," it said.
Ngalaah Chuphi, a partner at the South African offices of private equity company Ethos, on Thursday said the appetite for funding private equity deals in South Africa was strong, particularly among the big five banks.
"Investors always have capital if a deal fits with strategy and is within the prudential limits of their capital," Mr Chuphi said.
"The debt markets are open and you can get debt from the banks and lending has improved almost back to levels before the (financial) crisis," he said.
Mr Chuphi said larger deals were taking longer to conclude because of investors’ and funders’ thorough scrutiny.
Jeffrey Bunder, Ernst & Young’s global private equity leader, said although the global economic environment remained an obstacle, credit availability and an improvement in fundraising would sustain activity levels.
"(Private equity) firms have significant capital to invest and continue to search for good-quality deals in this tough environment, when compared to their corporate peers, who are less confident in pursuing (mergers and acquisitions) in this environment," said Mr Bunder.