Private Equity in the first half of 2017

Now that we’ve made it halfway through 2017 let’s take a quick look back, and spell out a couple of hunches going forward.

The first half of 2017 continued to see more hesitation; small deals went through, a few large corporate acquisitions but by and large buyouts continued to be on a downward trend. On the flip side, IPOs and corporate sales (cash outs) have been few and far between. “Dry Powder” continues to grow and has stayed dry and in barrels. What’s causing the fizzle? Well, there is a lot of confusion about the U.S. government as agenda items have failed to be completed. Interest rates have risen, albeit slowly and have yet to exert pressure for sales, equities have continued to increase providing for corp acquisitions. There’s also pricing, over the last few years with more funds circling fewer targets, and plentiful supplies of cheap money deals have been priced “to perfection.” Perfect being defined not as without error, but without money left on the table.

Where are things going? There are going to have to be IPOs and sales because interest rates are rising and it will put pressure on the indebted portfolio companies — however, they have likely locked in a lot of $ at very low rates, so this will play out over the next couple of years. It’s impossible to say what the government is going to be able to get done regarding regulation, taxes or health care, but each is a large lever that will change the playing field. Tax reductions should enable more corporate acquisitions as should deregulation. Health care, depending on where it ends up would have more of an impact on individuals or small companies.

Also published on Medium.