Private equity and venture capital investments touched a record high during 2015, with investors striking larger deals in the start-ups and technology space.
TRENDS TO WATCH
Stressed asset sales
With banks trying to clean up their books and companies looking for ways to reduce debt, expect stressed asset sales to pick up in 2016. In some cases, companies are trying and sell some of their operational assets to financiers in sectors such as roads. Banks will also try and offload assets where they have converted debt into equity. Stressed asset funds, private equity funds and asset reconstruction companies may emerge as likely buyers.
As start-ups struggle to raise larger rounds of funding and capital becomes less easily available, consolidation will continue with larger peers or with brick and mortar firms that are seeking to add technology capabilities. Venture capital funds will also be looking at merging their existing portfolio companies with better performing ones to secure exits.
Most private equity funds are now seeking to do majority control or buyout deals, which give them greater control over their investee companies. It also allows for smoother exits. Control deals in 2015 crossed the $2 billion mark. With funds expressing their preference for such deals, the trend may build.
In 2015, more than 21 firms managed to tap the primary markets. Many of these firms were backed by private equity firms that were looking to exit. If the markets remain conducive, expect exits to remain strong. This, in turn, will help funds raise new capital for fresh investments.
Direct deals by LPs
Globally limited partners, or LPs, are consolidating the number of funds or general partners (GPs) they invest through. Many are doing deals directly. Kuwait Investment Authority, Abu Dhabi Investment Authority, Canada Pension Plan Investment Board (CPPIB) and Public Sector Pension Investment Board (PSP Investments) are among the limited partners investing through direct deals.