KPMG Poll: PE Execs Prefer North America

Conventional wisdom is that emerging markets present the best return prospects for today’s private equity investors, but many are remaining closer to home.

At least that’s the finding of KPMG, which last month polled 60 senior private equity professionals. Forty-eight percent picked North America as the best place for investing based on competition, relative valuations, projected returns, economic outlook and relative ease of doing business. China came in second with 19%, while Latin America ranked third with 17% and India had 7 percent.

PE execs apparently are attracted to the U.S. economy, which is rebounding slowly and promising future growth, says Shawn Hessing, national lead partner for KPMG’s U.S. Private Equity Group. Hessing admits that all the buyout execs questioned were based in the U.S., which naturally makes them very comfortable with North America. “The devil is what you know,” Hessing says. “And it’s something you don’t want to run away from.”

What sectors showed the most promise? Financial services and healthcare each earned 22%, placing a joint first place. So is that whole economic collapse thing forgiven? Hessing suggests that private equity typically targets industries that promise good returns, which financial services offer (even if they sometimes need some taxpayer assistance to get there).

Moreover, the Obama administration has limited private equity access to banks. There are more than 700 banks on the FDIC’s problem bank list but private equity investments have been few. Thomson Reuters data said that PE has been involved in a handful of bank merger so far this year while others estimate it as high as 20 deals.

“There hasn’t been a great deal of penetration into financial services,” says Hessing. “It’s the great unknown. It’s a situation where private equity could put its money to work.”

The high interest in healthcare is also due to pending regulatory reform, Hessing adds, saying that changes often lead to opportunities.