PE Dealmaking Robust but With More Caution
Private equity dealmaking slowed down but remained in healthy territory in the third quarter, amid talk of a potential recession.
Overall, private equity dealmaking ebbed along with the overall M&A market, but ample dry powder and favorable financing trends continue to fuel activity.
“The market remains very hot overall,” said Jim Andersen, founder and managing partner of Stamford, Conn.-based Clearview Capital LLC. “When asset prices are high, it’s a great thing for sellers. We have a new fund we’d like to deploy and we will. But if we have an asset that’s near ready we’ll sell it because multiples are really high.”
Clearview Capital continues to sift for companies with operating profits of $4 million to $20 million, but it’s less enamored of businesses that could be more vulnerable to an economic downturn. The firm raised Clearview Capital Fund IV LP with $550 million in commitments and Clearview Capital Mezzanine Fund I LP with $108 million, both in July.
“It’s always difficult to predict the future, but one thing seems certain — for years, the Fed has been printing money and it’s gotta go somewhere,” Andersen said. “Fundraising for PE funds is good. There’s a ton of money — it also has to go somewhere.”
GPs remain keen to do deals, but with an element of caution.
“I suspect what’ll happen if the economy slows down, marginal assets are much tougher to sell when people are worried about a recession,” Andersen said. “But people are paying sky-high multiples for good businesses. Overall, everyone seems really active.”
Looking ahead, Clearview is focused more on strong companies that can do well in any economic environment — such as healthcare. It’s working hard to avoid overpaying.
“Do you really want to buy in an inflated asset in a high priced environment — a cyclical business that can get hammered? I think not,” Andersen said.
Among advisers, Houlihan Lokey Inc. led The Deal’s private equity league tables with 89 total transactions year-to-date on Sept. 15, followed by 84 for Rothschild & Co, 80 for Jefferies LLC, 76 for Goldman, Sachs & Co. and 74 for Barclays.
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