U.S. Private Equity Firms Facing Competition from Global Markets in Capital and Acquisitions

NEW YORK--(BUSINESS WIRE)--Private equity firms in the United States are facing increased competition from foreign and international firms for investment opportunities within the U.S. market, according to the 2012 Global Private Equity Report by Grant Thornton International. Now in its second year, the report is the result of 143 in-depth interviews with senior private equity practitioners around the globe. It provides insight into private equity general partners’ expectations for numerous aspects of the fundraising and investment cycle during the next 12-36 months.

“There are global markets that are emerging as serious players in the game. Yet, there is still plenty of opportunity for U.S. PE firms to make the right investments and be successful.”

According to the survey, North America is among the top three regions for investment by private equity firms in the next two to four years, with 76 percent of respondents identifying it as such. In addition, 91 percent said they would be investing in the MENA (Middle East North Africa) region, while 71 percent identified the BRIC (Brazil, Russia, India, China) countries as an investment opportunity.

Similarly, the survey shows that 43 percent of respondents plan to open an office in North America in the next two to three years, while 40 percent said the same about MENA, and 28 percent plan to do so in the BRIC countries.

In fact, regarding the strongest competition for deals in the next 12 months, 18 percent of North American respondents cited foreign/international private equity firms, far more than the 31 percent attributed to trade buyers.

When asked if they expected the level of investment in their region to increase, decrease, or stay the same, nearly 60 percent of respondents in North America said “increase,” compared to 60 percent of those in MENA and nearly 40 percent of those in the BRICs.

“North America, and the United States specifically, is a far more mature investment market than others around the world, so it’s not surprising that there is increased interest from global PE firms to invest here,” said Carlos Ferreira, a partner in Transaction Advisory Services of Grant Thornton LLP. “PE firms here have to realize that they’re not the only ones invited to the show—they are going to have to figure out a way to thrive despite this growing competition from foreign investment firms.”

With a global economy that has been hampered by European debt crises and U.S. recessions, it’s not surprising that respondents are still cautious about the fundraising environment. In fact, 20 percent of respondents in North America described their outlook about the current fundraising environment as positive. It was actually the most optimistic region, with only respondents in MENA coming close. Of the other regions, 6 percent of Asia-Pacific respondents, 9 percent of European respondents, and 8 percent of those in the BRIC described their outlook as positive.

One thing North American respondents are not as optimistic about is the perception of the private equity industry overall. Nearly 65 percent of respondents believe the image of the industry is deteriorating, far more than their global counterparts. In fact, in the MENA region, more than 50 percent of respondents believe the image of the industry is improving, likely because it is still a burgeoning industry. Even so, image is not a concern for respondents around the world. Instead, they consider the biggest challenges to be regulation (34 percent), macro economy (34 percent), competition (24 percent), and fundraising/IR (20 percent).

“From a global standpoint, this is an interesting time for the PE industry,” said Ferreira. “There are global markets that are emerging as serious players in the game. Yet, there is still plenty of opportunity for U.S. PE firms to make the right investments and be successful.”

2012 Global Private Equity Report Background

Sample and methodology

Between July and September 2012, 143 interviews were conducted with top executives from private equity firms. Respondents included general partners in five principal regions/categories:

			32%		Western Europe
			21%		North America (USA and Canada)
			26%		BRICS (Brazil [and broader Latin America], Russia, India, China, South Africa)
			11%		Asia Pacific
			10%		MENA (Middle East and North Africa, including Turkey)

Interviews included a mixture of quantitative and qualitative questions. Arbor Square Associates, an independent research firm, conducted the research.

To download a copy of the report, follow this link: http://www.gti.org/files/global_private_equity_report_2012.pdf

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