INTA - DealCloud Dealmaker Pulse Survey Shows Deal Activity Is Ready to Plateau
(NewsDirect)
- 45% plan to raise their largest fund ever; 14% predict alarger fund than anticipated
- Nine out of 10 (89%) private equity firmsclosed deals in the past 6 months
- 89% also predict closing asmany or more deals in the coming 6 months as they did in the previous6 months
Thecoming 6 months will bring increasingly stiff competition for moreprivate equity deals at higher prices that demand larger fund sizes,going beyond the significant rebound that had been reported 6 monthsago, according to the autumn 2021 edition of the DealCloudDealmaker Pulse Survey Report released today by Intapp (NASDAQ: INTA), a leading provider of industry-specific, cloud-basedsoftware solutions that enable connected professional and financialservices firms.
Among the 89% of private equity survey respondents who saidtheir firms had closed deals in the past 6 months, the number of dealsclosed — 4.3 on average — is expected to remain the same in thecoming 6 months (according to 51% of respondents) or move higher(38%).
Competitionfor deals appears to be plateauing. More than half of surveyrespondents (57%) expect the deal market to become more competitive inthe next 6 months than it has been during the past year, though thatfraction is significantly smaller than the 67% of respondents whoresponded similarly 6 months ago. Of those who predict an increase incompetition, 42% said there are too many PE firms chasing too fewquality deals and 49% feel pressure from limited partners to put cashin play.
“Theindustry has shown tremendous resilience through the pandemic” saidBen Harrison, President of Financial Services at Intapp. “Privateequity firms have shown both the strategic clarity and agility toshift priorities, which will help them compete in the newnormal.”
DIMINISHING GROWTH TRENDS
Nearing a possible saturation point, the deal market edgedfurther upward. Key findings include:
- The firms that reported having closed adeal in the last six months inched up 2% from spring to autumn 2021(87% to 89%), a much lower rate than the 17% increase in the 6-monthperiod between our autumn 2020 and spring 2021 survey. Lookingahead, 75% of the respondents who said their firms had not completed adeal between the spring and autumn surveys do plan to close at leastone deal in the coming 6 months.
- Sixty percent of autumnsurvey respondents plan to prioritize new acquisition activity overroll-ups or working with portfolio companies to improve operations —down from 84% who planned to focus on new deals in spring. Infact, 24% plan to make working with existing portfolio companies theirtop priority, compared to just 7% in the prior report.
- Four in 10 dealmakers (40%) think valuations and pricingwill be higher in the coming 6 months than they have been for the past12 months , though this is down from more than half of respondentswho projected higher valuations in spring 2021.
- Manybankers (52%) say their firms will take advantage of highpricing/valuations by selling companies earlier than ever before. High prices also draw concerns; 39% of respondents worry aboutincreased or overlooked risk and 36% about the speed of capital tomarket.
- The combined effect of high valuations andcompetition for deals is pushing 27% of survey respondents to makelarger acquisitions than their typical comfort zone.
“Large, midsize, and boutique firms eachface different headwinds as they react to the competitive market,”said Harrison. “Large firms are closing more deals and addingsectors to their portfolios — perhaps squeezing into others’territory; midmarket firms refuse to invest in companies that couldhurt their reputation; and boutiques may not feel pressed to changetheir sector focus but find themselves most likely to feel pressurefrom LPs to put capital in play.”
Several global trends are also affecting the private equityindustry. Talent concerns have shifted significantly, with a growingnumber of respondents — 41% up from 30% 6 months ago — admittingthat recruiting and hiring outside talent has become their greatesttalent issue, and 16% of firms focusing on retaining existing talent,compared to just 6% in the spring.
Nearly all respondents (99%) view environmental,social, and corporate governance (ESG) as a factor that has eitherincreased or retained the same level in importance during the previous6 months, and 48% noted they would decline investments due to ESGconcerns.
Harrisonnotes, “This edition of the Dealmaker Pulse Survey Report shows thatoverall expectations for acquiring new companies, hiring great talent,and achieving higher valuations have dampened a bit, but competitionfor assets will likely rise for most firms — and many are activelychanging investment strategies as a result.”
The Autumn 2021Dealmaker Pulse Survey Report is available at dealcloud.com/pulse .
The fourth semiannual survey wasconducted during a 2-week period in October 2021 and reflects theanonymous responses of more than 150 private equity professionals.
About Intapp
Intapp makes the connected firmpossible. We provide cloud software solutions that address the uniqueoperating challenges and regulatory requirements of the globalprofessional and financial services industry. Our solutions help morethan 1,950 of the world’s premier private capital, investmentbanking, legal, accounting, and consulting firms connect their mostimportant assets: people, processes, and data. As part of a connectedfirm, professionals gain easy access to the information they need towin more business, increase investment returns, streamline deal andengagement execution, and strengthen risk management and compliance.For more information, visit intapp.com and connect with us on and .
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