PE Deals on the Rise, Retail Remains a Question

Optimism abounds among private equity fund managers. According to our second annual Perspective Private Equity Study, they expect to close more new deals in the coming year than they did during the past 12 months. In fact, half (49%) of the study respondents expect to close three or more deals during the next 12 months. That’s compared to only 31 percent who reported closing three or more deals during the past year.

Where are the greatest opportunities for new investments? Many PE professionals point to the manufacturing (37%) and healthcare & biotech (23%) industries. This marks a switch from last year when 35 percent and 21 percent of respondents saw opportunities in healthcare and manufacturing respectively. According to Mat Wood, Partner in the Private Equity Practice at BDO, uncertainty in healthcare legislation combined with stabilization of the U.S. manufacturing sector are likely influencing that change.

Despite the forecasted uptick in deals overall, PE professionals are less enthusiastic about opportunities in the retail sector. Just 6 percent of survey respondents believe there are strong opportunities in retail and distribution.

Still, all’s not been quiet on the retail front. In November, J Crew agreed to a $2.86 billion amid low sales. While it’s unusual for retail deals to take place in the 4th quarter, the holiday season cards are now laid out, and PE interest may be slowly increasing.

Chatter has also circled around several retailers under $5 billion in market capitalization. Just last week, American Eagle and Big Lots saw a surge in stock prices amid buyout rumors.

What do you think about the opportunities for PE investment in the retail sector? Are there good deals to be had?