A survey of listed private equity (‘LPE’) managers’ expectations for the next six months suggests that the current strong rate of realisation activity is set to continue or increase, driven in particular by sales of portfolio companies to corporate acquirers. Nearly two-thirds of respondents expect exit levels to remain steady, while 39% expect them to rise further, while no respondents anticipated a fall in divestment activity.
Meanwhile, the majority of respondents expect new investment rates to remain steady, but purchase price multiples – the amount private equity firms will pay for companies – is a more mixed picture, with 22% expecting prices to rise, 11% expecting a fall and the remainder anticipating prices to hold steady over the next six months.
Portfolio company earnings are expected to be stable or growing across all regions except Continental Europe, where a small minority of respondents anticipate a deterioration in performance. Precisely half of respondents expect secondary market activity to increase, while the remainder anticipated current levels to remain steady. Pricing in the market for secondary interests in private equity limited partnerships is expected to either increase or hold steady by all respondents.
Regarding listed private equity companies, two-thirds of respondents expect investor appetite for LPE shares to increase over the coming six months. Meanwhile a third of respondents see evidence of an increasing appetite for LPE companies to pay a dividend, while 39% do not see such evidence.
Andrea Lowe, CEO of LPEQ, said, “LPEQ’s members enjoy a privileged insight into the trading positions of high potential private companies across all major sectors and regions. Our latest Manager Insights survey is therefore an early indicator of future trends in the corporate sector. It is encouraging to see widely held expectations of investment and divestment activity maintaining current levels or rising. Expectations around portfolio company performance and future investment levels remain robust, particularly in the UK despite political uncertainties in the run up to the general election. A minority of managers express concern around portfolio company earnings in Continental Europe but overall the picture is one of improving performance or business-as-usual.”