One of the key trends we follow is the funding available to equity firms, as this is a vital indicator of how much capital is available for future acquisition purposes. This is a critical factor because equity firms exist to do one thing: Invest committed capital in order to earn a return for their limited partners. And the good news is that 2016 was a record year for fundraising. This is how Mergers and Acquisitions magazine described the situation:
The private equity coffers are primed for M&A deals in 2017, thanks to successful fundraising in 2016. The dollars raised were on par with 2014, the best year since the financial crisis, according to preliminary data from Preqin. In addition, 2016 was the fourth consecutive year in which annual fundraising totals exceeded $300 billion.
The following table highlights the 2016 data:
Since these 2016 numbers are preliminary, it is expected that once the final tallies are done, 2016’s total will easily exceed the record amount raised in 2014. Keep in mind that most funds have a limited life span in which to invest their capital. Typically 3-5 years is normal, which means that on a combined basis, since 2013, equity firms have raised over $1.3 trillion.
This is great news for owners of privately held companies because the reality is until this money is invested, it is not earning a return for the firms. The fantastic news is that since most funds use debt to fund portions of their acquisitions, the $1.3 trillion will be leveraged to invest significantly more.
Certainly, not every privately held company is a viable target for an equity fund. Generally, these firms have specific criteria regarding industry, size, and location for their investment in targets.
Generational Equity dealmakers work directly with professional buyers on a daily basis. And with over 30,000 registered buyers in our database, we have access to most likely any firm that would have an interest in your industry and/or size of company.
To learn more about how you can take advantage of the $1.3 trillion needing to be invested, please reach out to us and we will be glad to arrange for you to attend one of our executive exit planning conferences. While there you will learn about all the current trends driving buyer activity and discover how you can begin to build a buyer-ready business today.
By Carl Doerksen, Director of Corporate Development at Generational Equity.
© 2017 Generational Equity, LLC. All Rights Reserved.
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