PE Pros See Rosy Future (but Not This Year)

Private equity firms are nearly unified in their belief that things will get better. It just won’t be this year, that’s all.

Nearly 70% of respondents to this year’s BDO USA PErspective Private Equity Study, when asked which quarter or year they felt 2007 levels of dealmaking will return, said “2012 or later.” BDO study included perspectives from more than 100 respondents from about 100 funds ranging in size from $30 million to $35 billion.

They’re not bullish on getting increased leverage anytime soon either; more respondents said that for their last, as well as for their next, deal, it is expected no more of the transaction than 60% would be paid for with debt.

“No one expects the double dip anymore,” said Lee Duran, BDO’s private equity practice leader. “But there’s still uncertainty.”

But it’s not all bad news.

When BDO conducted its private equity study a year ago, a whopping 38% of respondents said they had engaged a turnaround professional during the previous year and an astounding 81% of them said they had sought to renegotiate debt. This year’s study still had two-thirds of interviewees acknowledging they tried to renegotiate debt, and only 26% overall said they had called in for reinforcements in the form of turnaround pros.

Middle market investors are getting bullish on healthcare for the 12 months ahead, after big LBO shops like Providence Equity Partners and Apax Partners started gobbling up hospital systems and service outsourcers almost as soon as the Obama Administration revealed ambitious plans to provide millions more Americans with access to better care. Forty-three percent of respondents expect the greatest amount of opportunities to emerge in the healthcare space, specifically pertaining to deals in the $250 million to $500 million range. Last year, more survey respondents anticipated opportunities in healthcare to emerge than in any other sector, but the BDO survey did not break down responses by deal size.

This year, middle market and lower middle market investors also expect to find dealmaking opportunities in the manufacturing and technology spaces.

That isn’t to say that bigger LBO shops are ready to back out of the healthcare sector (but, you already knew that). Respondents prepared to make deals sized $1 billion and up said the bulk of their opportunities will be coming in retail, natural resources, financial services and, also, healthcare.