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October 23, 2009

Private Equity is Following M&A Sector Trends for Market Recovery

I was going back over some first half numbers from mergermarket numbers on Private Equity and the overall M&A market in general in addition to some PE survey numbers. I was hoping to see sector specific momentum tracking to the trends I had previously written about noted in a J.P. Morgan/Thomson Reuters report stating that Healthcare and TMT (Telecom, Media and Technology) would lead the rebound with an eventual move towards Financial Services, Utilities and Industrials. Interestingly enough, we seem to be right on track in North America.

 

 Overall M&A numbers collected by mergermarket showed approximately 830 TMT deals followed by 630 deals in Life Science/Healthcare, 450 deals in Energy/Utilities, 340 deals in Business Services and 320 deals in Financial Services for the first half of 2009. Playing to script, TMT and Life Sciences/Healthcare lead the way in overall deal activity (total deal value is slightly different than the above rankings). What is really interesting is that in a Private Equity survey, the identified sectors for upcoming investment showed a dramatic shift. Investment for the next 12 months will be made in the following sectors by responder ranking Utilities/Energy 50%, Life Science/Healthcare 48%, Financial Services 40%, Business Services and Industrials at 35%, with TMT at 12%.  This would make sense if you follow the path of the recovery with TMT trailing as we move across the curve, but Life Sciences/Healthcare oddly stays surprisingly strong. This assumedly has to do with uncertainty with a pending legislative overhaul and interest in finding new value once the new rules are sorted out. What is not as certain is if we have progressed to Utilities/Energy or if it is also being influenced by pending legislation. In summary, investment trends are showing that we are starting to climb out of the recession with some mixed signals primarily due to market distortions from legislative influences. The bigger story will be if debt financing frees up enough to further enable deal flow increase from this low volume mark and how those backlogged investments play out.

Posted by Jeremy Kloubec at 07:10 PM | | Comments (0) | TrackBacks (0)

October 20, 2009

Contactless mobile payment

Contactless Mobile Payment - Citi has already launched it and couple of other banks are building plans to launch it in the market. How much is the market share ? How many people would use it? We need to look at the market share of this payment device before big ticket investments can happen.

Posted by Mritunjay Singh at 08:01 AM | | Comments (0) | TrackBacks (0)

October 17, 2009

Private Equity Fund Raising Lowest Since 2003

Preqin recently released a report on the Q3 2009 Private Equity fund raising amount which was approximately $38B. While that may seem like a lot of money, this represents the lowest quarterly total since Q4 2003. Depending on how you read into that figure, it could seem alarmingly bad for Private Equity. However, I am not so concerned.

 

 First, with tight credit, deal flow is going to continue to be down to there is no real sense of urgency to raise significantly more capital at the moment. Sure, you would always like to have the commitments, but it also needs to be put to use. Secondly, which ties to the first point, there is a significant amount of dry powder currently with the Private Equity firms themselves which has not been allocated yet. Fund raising had continued through the run up and subsequent bust while debt financing withered away leaving used funds. This is a significant barrier for further commitments from existing LPs. Lastly, the equity markets are moving again. LPs are taking advantage of the current market momentum to recoup losses from last year’s downturn. Additionally, they need to rebuild their overall portfolio values to free more dollars for Private Equity allocation. Even though the percentage allotted for Private Equity may have stayed the same from a percentage basis, the total dollar value shrunk along with the overall portfolio value leaving less room for new investment.

 

Overall, it is always good to have strong fund raising for Private Equity firms, however, this will not constrict deal flow once debt financing is more readily available. I anticipate a bullish run in 2010 as they start to take advantage of reduced asset prices.

 

Posted by Jeremy Kloubec at 02:39 AM | | Comments (0) | TrackBacks (0)