Pressure to put dry powder to work will likely lead to bigger and bolder PE transactions in the year to come.
By Manuel Deó
Spanish private equity (PE) houses are sitting on large piles of dry powder as they scour the Spanish market for investment opportunities, as is the case in much of Europe. According to Pitchbook, total deal value has decreased by 15.3% compared to the same period in 2017.
This dry powder will not simply disappear. The pressure to put that money to work will likely lead to bigger and bolder PE transactions in the year to come, as PE firms take on more ambitious targets across the country. PE firms will need to source more off-market deals and corporate carve-outs in 2019. These transactions will likely be more common in the next few months as PE firms continue to operate in a competitive sellers’ market.
Limited partners will put more pressure on PE firms to generate returns, inevitably leading to more headline-grabbing buyout attempts. The greater capital needs of larger deal sizes likely will fuel a revival of consortium deals, in which two or more sponsors pool their resources as co-investors. An uptick in consortium-led deals can be positive for corporate boards and senior management, because such deals widen the range of possible investor structures, and deepen the pool of accessible capital and expertise to enhance shareholder value. Continue Reading