We’re entering the last month of the first half of 2019 and to the surprise of many, the current economic expansion continues to impact the market. As of January 2019, Preqin is reporting that there is $2 trillion in dry powder ($1.2 trillion is earmarked for private equity). With that amount of capital waiting to be deployed, firms need to consider how to strategically adjust to current market conditions to drive fund performance. It’s a fool’s game to not implement a thoughtful, data-driven approach to developing business.
Earlier this year, SPS’ Nadim Malik and Brenden Gobell co-authored an article in PE Hub entitled, How PE firms can best distinguish themselves: buy-and-build and strong deal sourcing. Messrs. Malik and Gobell discuss current market trends to determine focal areas where PE firms are successfully differentiating themselves. After sifting through the data, both the buy and build and deal sourcing strategies are the clear winners.
Implementing a buy-and-build strategy is a perceptive process for differentiating and distinguishing a fund in the market. This strategy has many benefits, including reduced operational costs and the synergies created by economies of scale. Moreover, these deals tend to trade at lower purchase multiples, thus making them more attractive to purchase. Firms should consider building out or finding complementary add-ons to enhance a platform investment.
As long time readers of the Source will know, SPS is driven by deal sourcing. Yet, it’s always nice to see the data proving out the true value of both deal sourcing and the dedicated business development professional. Currently, there is a considerable capital on the line, compounded with acute competition in the market, to not invest in your deal sourcing strategy. It’s fundamental to a private equity firm’s growth and success.
While the ability to measure the efficacy of a sourcing strategy, as well as a fund’s market coverage, deal flow stemming from the buyer’s intermediary universe also needs to be thoughtfully analyzed. This paves the way for streamlining deal-sourcing with the use of intelligent automation to achieve top-quartile fund performance.
SPS is committed to partnering with its clients to differentiate themselves in this competitive market. By pairing actionable data with an intelligent and powerful technology, the SPS Portal can help drive better fund performance. If you’re considering ways to impact your strategy, Malik and Gobell’s article is well worth the read and provides a detailed, analytical analysis of each approach.
Last week’s deals today
June 17 – 21, 2019
~86 deals traded
Deal of the week
Ares Management sold its position in Smart & Final Holdings to peer-equity investor, Apollo Global Management for $1.12 billion. Centerview Partners, Citigroup, and Jefferies & Co. acted as the sell-side financial advisors for this transaction. Smart & Final is a Commerce, CA based operator of retail grocery stores.
Most active subsectors
- IT: Software & services
- Industrial: Misc. equipment & products
- Services: Data and information
- IT: FinTech
- Financial: Services
Most active cities
- San Francisco