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“Unlike many other sectors, the pandemic actually acted as a catalyst for growth instead of restricting it,” said Alex Hartley, head of private equity at KPMG’s UK corporate finance practice. PE firms have been particularly keen on digitally-driven businesses that could keep pace with accelerated demand during the pandemic, which enabled such firms to bring forward exit strategies as soon as 12 months, the research found.
“However, a lot of sectors are converging on tech, so pricing in those areas has been strong. Private equity investors are likely to continue chasing the businesses that have fared best and shown robustness, so we expect to see further activity in sectors such as TMT, Business Services and Healthcare, as well as those that can demonstrate a strong ESG angle,” Hartley said. The announcement of vaccine rollout programmes at the end of last year fuelled a wave of mid-market PE exit activity in the final three months of 2020 that hadn’t been seen in three years – but they then dropped by 29% in H1 2021, from 66 to 47.
“Confidence, pent-up demand and sheer relief is likely to lead to an increase in GDP and ensure a healthy market for mid-market PE transactions, albeit with substantial variation between sectors,” said Jonathan Boyers, head of KPMG’s UK corporate finance practice. Investors’ high reserves of capital, debt, and uncertainties about capital gains tax change, all suggest the conditions “look positive” for continued mid-market PE deal momentum in the second half, according to Boyers’ forecast.
Source: City A.M.
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