PE Execs: Low Deal Flow Until Late 2010

NEW YORK CITY-Private equity executives say they don’t expect deal activity and debt availability to rebound until late 2010, according to a KPMG survey released Monday. Lack of financing and other market issues will keep deal flow low until then, say 55% of those surveyed at the Dow Jones Private Equity Analyst Conference in New York earlier this month.

“Uncertainty continues to shackle the psyche of the PE industry,” says Shawn Hessing, national lead partner for KPMG’s US private equity group, in a release. “With valuation down and the cost of financing up, buyers and sellers are finding it difficult to get to common ground although we are seeing some signs of progress.”

Thirty percent of survey respondents say the lack of lending is the biggest issue facing the industry. A lack of exits is cited by 26% of respondents, with 24% identifying the debt coming due on deals in 2011 and 2012 as a major worry. A pullback by limited partners is the biggest concern for 13% of respondents, and the remainder is worried about the possibility of increased regulation.

KPMG’s survey says 58% of respondents don’t think IPO demand will return before 2011 at the earliest, and 24% say they expect companies will shun IPOs in favor of alternative sources of funding, such as growth capital. Thirty-seven percent of respondents say they expect demand for public company offerings in 2010, and 6% think the prospects are too hard to predict in this economy.

Real estate tops the list of when it comes to distressed transactions, according to KPMG’s survey; 44% of respondents think this sector will provide the best returns. In second place is financial services at 34%, with consumer-goods companies cited by 14% of respondents, retail by 6% and media by 2%.