A Thursday morning session at the ACG InterGrowth meeting in Las Vegas painted a picture of the middle-market private equity industry working its way through a down-cycle, using the time on its hands to work with portfolio companies, woo owners and managers of businesses that may become available later on and explore alternate strategies such as PIPE deals, providing growth capital or working in distressed situations.
The session was moderated by Nathaniel Baker, middle-market editor for The Deal, who led a discussion that also touched on the need for industry specialization among PE firms and the usefulness of a tight geographic focus for some smaller firms.
David Santoni, managing director of Lazard Middle Market, noted that it's a bit late in the cycle to try to build a distressed business. He also noted the irony in the last cycle of sector-focused PE firms being disciplined bidders on deals -- and thus losing out to generalist firms in auctions.
Ian Pugh, national PE leader, transaction services, at KPMG LLP, said he started seeing small signs of life in the PE market in mid-March, with some finance providers coming back and some deals getting done. This was consistent with remarks at the InterGrowth corp dev sessions Wednesday, where one corporate dealmaker said he'd been surprised recently to be outbid by a PE firm in a small healthcare deal.
Pugh also said that earnouts and seller paper are in vogue, two more themes that came up at the corp dev sessions.- Kenneth Klee
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Those that know how to strategize, especially in a tough economy will find opportunities in any market; especially the middle-market at this juncture.