OMMAX is supporting several PE firms in DD projects and digital value creation. Based on some major trends that we have seen in 2019, we identified 5 takeaways for PE work in 2020.
1. Multiples for acquisitions of companies remain high
Even though at the beginning of 2019 it was expected that multiples will go down due to a more pessimistic economic outlook and a weakened global expansion, the opposite occurred. Multiples remained high in 2019 and numerous attractive targets where for sale. At the same time, we observed two developments: First, that the overall quality of targets marginally decreased. Investors wanted to benefit from high multiples and initiated the sale of portfolio companies that had just been acquired in 2016/17 but did not show the performance needed. Second, we saw quite a few processes being pulled during the transaction as the positive outcome appeared unlikely.
2. Strong pipeline of capital
There is a lot of capital in the market both equity and debt due to major funds having been raised: CVC recently closed its second growth fund Fund II with commitments of $1.6 billion. The same accounts for EQT having closed its second Ventures fund, securing commitments totalling $740,46 million and Permira has closed its latest fund in October at $12.13 billion of committed capital. All this capital needs to be deployed in 2020 and over the next years while persistently low interest rates make private equity investments more attractive Therefore, competition among private equity funds will increase, multiples will remain high and it will be more difficult to identify attractive and high quality targets.
Do you want to learn more about our further key takeaways? Download our White Paper!